Question

Company B considers investing in a machine that costs €120,000. The machine is expected to produce revenues of €100,000 per year. The cost of materials and labor needed to generate these revenues will total €25,000 per year and other cash expenses will be €25,000 per year, for the next five years. The machine will be depreciated on a straight-line basis over five years with a zero salvage value and is estimated to be sold for €20,000 Euros at the end of year 5. Assume that the corporate tax rate is 15% and the discount rate is 10%.

What are the net cash flows of the project for years 1 to 4?

Select one:

a. 40,540

b. 22,300

c. 35,590

d. 46,100

e. 57,890

Answer 1