Respuesta :
The present value for all the future operating cash inflows must be closest to $452,300. Option (b)
The net amount of cash and cash equivalents coming into and going out of a business is referred to as cash flow. Money spent and money received reflect inflows and outflows, respectively.
Add your net income and non-cash expenses, then deduct your change in working capital and capital expenditures to arrive at free cash flow. Free Cash Flow is calculated as Net Income plus Non-Cash Expenses less the change in working capital minus capital expenditure.
Cash Flows
Year 0 =-$250,000 -$100,000 =-$350,000
Year 1-3 = $ 80,000
Year 4 = $ 80,000 -$40,000 =$40,000
Year 5 = $ 80,000
Year 6 = $ 80,000 + $ 90,000 +$100,000 =270,000
present value for operating cash inflows =$ 80,000/1.1 +$ 80,000/1.1^2 +$ 80,000/1.1^3 + $40,000/1.1^4 +$ 80,000/1.1^5 +270,000/1.1^6 =$428,350.36
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Correct Question:
(Ignore income taxes in this problem.) The Becker Company is interested in buying a piece of equipment that it needs. The following data have been assembled concerning this equipment:
Cost of required equipmwnt.......$250,000
Working capital required........... $100,000
Annual operating cash flow........ $ 80,000
Cash repair at end of 4 years .... $40,000
Salvage value at end of 6 years... $90,000
This equipment is expected to have a useful life of 6 years. At the end of the sixth year the working capital would be released for use elsewhere. The company's discount rate is 10%.
The present value of all future operating cash inflows is closest to _____.
