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Compute the net cash flow in year

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Empathy Ltd is planning to purchase a new equipment. The equipment costs $350,000, and an additional $110,000 is needed to install it. It will be depreciated straight-line to zero over a 5-year life. The additional annual revenues are $265,000 whereas the annual cash operating expenses are $83,000. The equipment will be sold for $85,000 after 5 years. An inventory investment of $73,000 is required during the life of the investment. Empathy Ltd is in the tax bracket of 40% and its cost of capital is 10%

Question 1: Compute the net cash flow in year 0 and year 5.

Option a. $387,000 and $146,000

Option b. $533,000 and $231,000

Option c. $460,000 and $270,000

Option d. $533,000 and $270,000

Reference no: EM132564136

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