10. M&T Inc. is considering a robotic lawn care machine. Base price is $200,000. Also $20,000 to install it and can be depreciated using straight line depreciation. It will save $100,000 a year for 5 years in the cost of using an outside lawn care company. The tax rate is 30%. (a) What is up front year 0 capital flow. (b) What are net cash flows for years 1 through 5 assuming salvage value end of year 5 is $30,000?

10. M&T Inc. is considering a robotic lawn care machine. Base price is $200,000. Also $20,000 to install it and can be depreciated using straight line depreciation. It will save $100,000 a year for 5 years in the cost of using an outside lawn care company. The tax rate is 30%. (a) What is up front year 0 capital flow. (b) What are net cash flows for years 1 through 5 assuming salvage value end of year 5 is $30,000?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 5P

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

10. M&T Inc. is considering a robotic lawn care machine. Base price is $200,000. Also $20,000 to install
it and can be depreciated using straight line depreciation. It will save $100,000 a year for 5 years in the
cost of using an outside lawn care company. The tax rate is 30%.
(a) What is up front year 0 capital flow.
(b) What are net cash flows for years 1 through 5 assuming salvage value end of year 5 is
$30,000?

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