3-18. It is estimated that a certain pieće of equip- ment can savé $6,000 per year in labor and ma- terials costs. The equipment has an expected life of 5 years and no salvage value. If the company must earn a 20% annual return on such invest- ments, how much could be justified now for the purchase of this piece of equipment? Draw a cash flow diagram.

3-18. It is estimated that a certain pieće of equip- ment can savé $6,000 per year in labor and ma- terials costs. The equipment has an expected life of 5 years and no salvage value. If the company must earn a 20% annual return on such invest- ments, how much could be justified now for the purchase of this piece of equipment? Draw a cash flow diagram.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

someone solve it step by step but not use excel and draw cash flow diagram

3-18. It is estimated that a certain pieće of equip-
ment can save $6,000 per year in labor and ma-
terials costs. The equipment has an expected life
of 5 years and no salvage value. If the company
must earn a 20% annual return on such invest-
ments, how much could be justified now for
the purchase of this piece of equipment? Draw
a cash flow diagram.

Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

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