Net Cash Flow and After tax cash flow

timer Asked: Jun 28th, 2015

Question description

Company is planning to buy a machinery at a cost of $20 million.  This machine will be used for 10 years. The machine will bring additional revenue as follows:

$10 million for first 6 years and $7 million for the last 4 years

Expenses = 60% of revenue for all 10 years

After 10 years the machine will be sold for an estimated price of $2 million and the estimated selling expense is $400,000.

Tax rate = 20%

A.  Find the net cash flow for t = 0

B.  Find the after tax cash flow for each year from year 1 to year 10.

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