What is the terminal cash flow-operating net cash flow

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Reference no: EM131333896

Exhibit 1 The president of Real Time Ltd has asked you to evaluate the proposed acquisition of a new computer system. The system's price is $39,000, and will be depreciated straight-line over a three year life. Purchase of the system would require an increase in net operating working capital of $2,000. The system would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. The system is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 30%.

1. Please refer to Exhibit 1. What is the operating net cash flow in Year 1? A. $ 9,000 B. $10,240 C. $11,687 D. $13,453 E. $14,400

2. Please refer to Exhibit 1. What is the terminal cash flow? A. $17,500 B. $19,500 C. $21,000 D. $25,000 E. $27,000

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Reference no: EM131333896

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