Calculate the annual cash flows for year

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A company is purchasing a new machine which will cost $125,000 with additional shipping costs of $5,000 and set up and installation costs of $10,000. An additional $8,000 in Net Working Capital will be required. Project life is six (6) years. The project will increase revenues by $90,000 each year and operating costs will increase by $30,000 annually. The machine has a class life of seven (7) years and will be depreciated using the straight line method. The company will sell the machinery for $50,000 at the end of five years. The company’s cost of capital is 12% and the marginal tax rate is 40%. Calculate the Annual Cash Flows for year 1.

Reference no: EM131495457

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