After tax cash flow fall before investment in new machine

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Reference no: EM131213029

Rooney, Inc. is considering the purchase of a new machine costing $600,000. The machine's useful life is expected to be 7 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after tax cash flow is expected to be $149,000. Rooney estimates its cost of capital to be 14%. (The present value of a $1 annuity for 7 years at 14% is 4.288, and the present value of $1 to be received in 7 years is 0.400)

The net present value of the investment in the machine under consideration is:

Upper level managers at Rooney, Inc. are concerned that employee estimates of future cash flows from the new machine may be overly optimistic. To what dollar amount can the annual after tax cash flow fall before the investment in the new machine should be rejected?

Reference no: EM131213029

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After tax cash flow fall before investment in new machine : Rooney, Inc. is considering the purchase of a new machine costing $600,000. The machine's useful life is expected to be 7 years with no salvage value. The net increase in annual after tax cash flow is expected to be $149,000. Upper level managers at ..

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