Determine the initial capital outlays

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Question - A company ABC is considering the purchase of new equipment. The equipment costs $350,000, and an additional $110,000 is needed to install it. The equipment will be depreciated straight-line to zero over a five-year life. The equipment will generate additional annual revenues of $265,000, and it will have annual cash operating expenses of $83,000. The equipment will be sold for $85,000 after five years. An inventory investment of $73,000 is required during the life of the investment. FITCO is in the 40% tax bracket and its cost of capital is 10%.

Required -

(i) Determine the initial capital outlays

(ii) Calculate the company's operating cash flows over the next five years.

(iii) Calculate the company total non-operating cash flows at the terminal period.

Reference no: EM132852846

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