What is the annual future cash flow for this investment

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Reference no: EM13794579

Anderson Corporation is considering investing $180,000 in equipment to produce a new product. Useful service life of the equipment is estimated to be 10 years, with zero salvage value. Straight-line depreciation will be used, i.e., $18,000 a year. The company estimates that production and sale of the new product to be produced by this new machinery will increase net income by $12,000 a year.

What is the annual future cash flow for this investment? (Show your work)

$________________

Using estimated cash flow numbers, please calculate the payback period for this investment.

________________ years

Assuming the company has a weighted average cost of capital of 12%, please calculate the present value of the estimated future cash flows. (You will need to use your TI BAII calculator.)

$________________

Having calculated the present value of the estimated future cash flows, should Anderson Corporation make this investment?

_________________

Reference no: EM13794579

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