. A regional super market chain is deciding whether to install a machine in each of its stores. Each machine costs $250,000. Projected income per machine is as follows: Figs are all in $ Year 1 2 3 4 5 Sales 250,000 300,000 300,000 250,000 250,000 Operating Expenses 200,000 200,000 200,000 200,000 200,000 Depreciation 50,000 50,000 50,000 50,000 50,000 Accounting Income 0 50,000 50,000 0 0 a) Why would the store continue to operate a machine in Year 4 and 5 if it produces no profits? b) What are the cash flows for investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life.
. A regional super market chain is deciding whether to install a machine in each of its stores. Each machine costs $250,000. Projected income per machine is as follows: Figs are all in $ Year 1 2 3 4 5 Sales 250,000 300,000 300,000 250,000 250,000 Operating Expenses 200,000 200,000 200,000 200,000 200,000 Depreciation 50,000 50,000 50,000 50,000 50,000 Accounting Income 0 50,000 50,000 0 0 a) Why would the store continue to operate a machine in Year 4 and 5 if it produces no profits? b) What are the cash flows for investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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4. A regional super market chain is deciding whether to install a machine in each of its stores. Each machine costs $250,000. Projected income per machine is as follows: Figs are all in $
Year 1 2 3 4 5
Sales 250,000 300,000 300,000 250,000 250,000
Operating Expenses 200,000 200,000 200,000 200,000 200,000
Depreciation 50,000 50,000 50,000 50,000 50,000
Accounting Income 0 50,000 50,000 0 0
a) Why would the store continue to operate a machine in Year 4 and 5 if it produces no profits?
b) What are the cash flows for investing in a machine? Assume each machine is completely
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