Question

Uw answer "Wczom = 1 2 3 4 26.4 " esp= ! Question 10 company has just purchased a machine for 100.000 kroner. The machine must be depreciated nearly over 5 years. However, the company estimates its useful productive life to be only 4 years and the company may therefore write off the remaining book value in year 4. The machine wm generate net cash flows before taxes (excluding effects of depreciation) of 40,000 kroner annually. The relevant tax rate is 30% What are the expected cash flows after tax from the machine in year 4?

Answer 1

Question 1:
The expected cash flow in year 4 = 40,000 kroner.

Question 2:
Net payment in A = 140

Net payment in B = 147.71
Formula: The present value of an annuity due (PV)

PV = {C× [1-(1+r)^-n]/r}×(1+r)

PV = Present value (The cumulative amount available at Present).
C= Periodic cash flow. 38
r =effective interest rate for the period. [(1.08)^(3/12)]-1 = 0.0194265
n = number of periods.

PV = {38× [1-(1+0.0194265)^-4]/0.0194265}×(1+0.0194265)
PV = 147.71

Net payment in C: 146.8

Formula: The present value of an ordinary annuity (PV)

PV = C× [1-(1+r)^-n]/r

PV = Present value (The cummulative amount available at Present)
C= Periodic cash flow.
r =effective interest rate for the period.
n = number of periods.

PV = 38.5× [1-(1+0.0194265)^-4]/0.0194265

PV= 146.8

Net payment in D: 140.74

PV = 152/1.08 =140.74

Option A is better.
Answer A. Pay 140 today.

depreciation each year = 100,000 20,000 Net cach How genuated (NCP)40,000 tax Rate (t) = 0.3 ② 30%. Expected cash flow in year & [[Eero] = NCF(1-E) + tax sheild due to depreciation (current year & Remaining) = 40,000 (1-0-3) + (29,000 +20,000) (0-3) - ECF q = 28,000 + (40,000 X0-3) 40,000 & Answer,