Rhps compnay is considering the purchase of a new machine

Reference no: EM13621088

RHPS Compnay is considering the purchase of a new machine. The new machine falls into the MACRS 7-year class, has an estimated life of 8 years, it costs $200,000 and RHPS plans to sell the machine at the end of the eighty year for $50,000. The new machine is expected to generate new sales of $30,000 per year and the firm will have a cost savings of $5,000 per year as well. In addition, the compani will need to increase inventory by $10,000 and accounts payable will decrease by $5,000. The company's tax rate is 40 percent. (Numbers in parentheses are negative)

1. What would be the cash flow from assets (CFFA) at t=0?

2. What would be the cash flow from assets (CFFA) at t=8? (MACRS Class percentage in year at is 4.45%)

Reference no: EM13621088

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