Calculate the Present Value to XYZ Ltd of Cash Flows

question 9

Multiple Choice

Calculate the present value to XYZ Ltd of cash flows from the ownership of equipment that it intends to lease to another company for five years.The equipment costs $500 000 and can be depreciated straight-line over three years for tax purposes.Assume the cost of capital is 10% p.a. ,the residual value is 20 per cent of cost and the tax rate is 30 per cent.

• A)$167 807
• B)$176 935
• C)$157 188
• D)$124 343

Learn the timeframe required to phase in new energy alternatives.

Comprehend the concept of net energy and its relevance to energy production.

Understand the process used to separate components of crude oil.

Know the primary ingredient of petroleum and its significance.

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Definitions:

Amortized

The process of paying off a debt with a fixed repayment schedule in regular installments over a period of time.

Loan Payments

The regular payments made to repay borrowed money, typically including both principal and interest components.

Amortized

A process of paying off debt in regular installments over a period of time, where each payment is partially principal and partially interest.

Compounded Semi-annually

Refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods twice a year.