Consider the Five Items That Follow, Which Are Related to Independent

question 21

Essay

Consider the five items that follow, which are related to independent investment opportunities.
Purchase price of a new machine: $850,000
Annual straight-line depreciation: $75,000
Annual savings in cash operating costs: $120,000
Advertising expenses related to a new marketing campaign in year 2: $35,000
Sale of an asset in year 6: Loss on sale, $60,000; proceeds received by seller, $23,000
Required:
Complete the following table, inserting the (pre-discounted) cash flow amounts that would be used in a net-present-value analysis. Column A should be completed based on the assumption of no income taxes; in contrast, Column B should be completed assuming the relevant company is subject to a 30% income tax rate. Be sure to note cash outflows in parentheses.

---

Definitions:

Red Sweater

A clothing item designed for the upper body, characterized by its red color and typically made from wool or synthetic materials.

Exam

A formal test of a person's knowledge or proficiency in a subject or skill.

Meat

The flesh of animals as used for food.

Post Hoc

short for 'Post Hoc Ergo Propter Hoc', a logical fallacy where one assumes that since event Y followed event X, event X must have caused event Y.