Reference no: EM132477592

A company is investigating the feasibility of purchasing a machine at the present time for $200,000.

The following information pertains to the acquisition and use of the machine over the next five years:

Point 1: In year one the cash revenues generated by the machine are expected to be $76,000, and these revenues are expected to increase by 6% year-over-year in each of the remaining 4 years that they own the machine. The machine is expected to be sold at the end of 5 years for its estimated salvage value of $20,000.

Point 2: Cash operating expenses directly associated with the generation of the annual revenues noted above are expected to be 65% of the revenues in year one, 64% of the revenues in year two, 63% of the revenues in year three, 62% of the revenues in year four, and 61% of the revenues in year five.

Point 3: In addition to the cash operating expenses, there will also be an annual depreciation expense of one-fifth of the cost (minus the salvage value) of the asset each year for the 5 years that the asset is held. The machine will require a major overhaul costing $40,000 at the end of year three.

Question 1: How would use the information in a spreadsheet form while ignoring income taxes?