Annual cash flow analysis

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Reference no: EM131810274

A profitable incorporated business is considering an investment in equipment having the following before-tax cash flow. The equipment will be depreciated by double declining balance depreciation with conversion, if appropriate, to straight-line depreciation at the preferred time. For depreciation purposes a $700,000 salvage value at the end of 6 years is assumed. But the actual value is thought to be $1,000,000, and it is this sum that is shown in the before-tax cash flow

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If the firm wants a 9% after-tax rate of return and its combined incremental income tax rate is 34%, determine by annual cash flow analysis whether the investment is desirable.

Reference no: EM131810274

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