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 3. 4. 5. Sales 250,000 200,000 50,000 300,000 200,000 50,000 50,000 250,000 200,000 50,000 250,000 200,000 50,000 300,000 Operating Expenses Depreciation Accounting Income 200,000 50,000 50,000 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.
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 3. 4. 5. Sales 250,000 200,000 50,000 300,000 200,000 50,000 50,000 250,000 200,000 50,000 250,000 200,000 50,000 300,000 Operating Expenses Depreciation Accounting Income 200,000 50,000 50,000 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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Transcribed Image Text: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
3.
5.
Sales
Operating Expenses
Depreciation
Accounting Income
250,000
200,000
50,000
300,000
200,000
300,000
200,000
50,000
50,000
250,000
200,000
250,000
200,000
50,000
50,000
50,000
50,000
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.
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