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Determine the equal annual net cash flows from operating

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Reference no: EM13510230

Connor Company is considering the purchase of new equipment for $182,000. The expected life of the equipment is 7 years with no residual value. The equipment is expected to earn revenues of $157,000 per year. Total expenses, including depreciation, are expected to be $130,000 per year. Connor management has set a minimum acceptable rate of return of 12%. Assume straight-line depreciation.

a. Determine the equal annual net cash flows from operating the equipment. Round to the nearest dollar.
$

Present Value of an Annuity of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 1.833 1.736 1.690 1.626 1.528
3 2.673 2.487 2.402 2.283 2.106
4 3.465 3.170 3.037 2.855 2.589
5 4.212 3.791 3.605 3.353 2.991
6 4.917 4.355 4.111 3.785 3.326
7 5.582 4.868 4.564 4.160 3.605
8 6.210 5.335 4.968 4.487 3.837
9 6.802 5.759 5.328 4.772 4.031
10 7.360 6.145 5.650 5.019 4.192

b. Calculate the net present value of the new equipment using the present value of an annuity of $1 table above. Round to the nearest dollar.
Annual net cash flow: $
Present value of equipment cash flows: $
Less equipment costs: $
Net present value of equipment: $

c. Does your analysis support the purchase of the new equipment?

SelectYesNoItem 6

I am looking for assistance with finding the equal annual cash flows from operating expenses.

I also need assistance with finding the annual net cash flow; present value of equipment cash flows; & net present value of equipment.

 

Reference no: EM13510230

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