Considering project to produce pens

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Reference no: EM131341865

Mideque, inc. is considering a project to produce pens. It is estimates that the initial cost of the equipment including transportation installation and so forth will be $24,000. Mideque also estimates that the revenue (sales) each year over the five-year life of the project will be $15,000. the other yearly expenses (e.g., COGS, wages and salaries, etc) will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15% per year. The loan will be repaid at the rate of $2,000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 50%. Assume that this is a replacement project. The old equipment can ve sold for $10,000. It was bought five years ago for $22,000 and was assumed to last for 10 years. Obtain the annual cash flow of the last period. Options A. 6400 B. 5300 C. 6000 D. 11000

Reference no: EM131341865

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