What is the net cash outflow at the beginning of first year

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Alaminos Corporation is considering the acquisition of a new machine at a cost of $180,000. Transporting the machine to Dickins' plant will cost an additional $18,000. It has a 10-year life and is expected to have a salvage value of $10,000. Furthermore, the machine is expected to produce 4,000 units per year with a selling price of $500 and combined direct materials and direct labor costs of $450 per unit. Federal tax regulations permit machines of this type to be depreciated using the straight-line method over 5 years with no estimated salvage value. Dickins has a marginal tax rate of 40%.

Problem a. What is the net cash outflow at the beginning of the first year that Dickens should use in a capital budgeting analysis?

Problem b. What is the net cash flow for the third year that Dickins Corporation should use in a capital budgeting analysis?

Problem c. What is the net cash flow for the tenth year of the project that Dickins should use in a capital budgeting analysis?

Problem d. What is the approximate payback period on the new machine?

Reference no: EM132730006

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