Majestic Aircraft Company (MAC) is considering purchasing new equipment with a purchase price of $200,000, shipping and handling of $4,000, and installation cost of $6,000. MAC is sending an employee for training to operate the equipment at a cost of $12,000. A working capital of $15,000 is needed to get the equipment up and running. The expected annual revenue from this machine is $50,000 and expected annual operating cost is $10,000. The equipment will be depreciated based on a Straight Line method over a seven-year life toward a zero salvage value. MAC is expecting to sell the equipment at $8,000 at the end of the seven years. Assuming tax rate of 40 percent calculate the following: • a. First cost (P) •b. Net annual cash flow (NACF) • . Terminal cash flow (TCF)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The book the question is from is "Engineering
Economics for Aviation and Aerospace By Bijan
Vasigh, Javad Gorjidooz"
Anaylysis and Present Worth, Discussion Questions
and Problems 5.1 (Page 141 - 142)
NOTE: Every final answer must be at least 2
decimal places
Majestic Aircraft Company (MAC) is considering purchasing new
equipment with a purchase price of $200,000, shipping and handling of
$4,000, and installation cost of $6,000. MAC is sending an employee
for training to operate the equipment at a cost of $12,000. A working
capital of $15,000 is needed to get the equipment up and running. The
expected annual revenue from this machine is $50,000 and expected
annual operating cost is $10,000. The equipment will be depreciated
based on a Straight Line method over a seven-year life toward a zero
salvage value. MAC is expecting to sell the equipment at $8,000 at the
end of the seven years. Assuming tax rate of 40 percent calculate the
following:
• a. First cost (P)
• b. Net annual cash flow (NACF)
• c. Terminal cash flow (TCF)
Transcribed Image Text:The book the question is from is "Engineering Economics for Aviation and Aerospace By Bijan Vasigh, Javad Gorjidooz" Anaylysis and Present Worth, Discussion Questions and Problems 5.1 (Page 141 - 142) NOTE: Every final answer must be at least 2 decimal places Majestic Aircraft Company (MAC) is considering purchasing new equipment with a purchase price of $200,000, shipping and handling of $4,000, and installation cost of $6,000. MAC is sending an employee for training to operate the equipment at a cost of $12,000. A working capital of $15,000 is needed to get the equipment up and running. The expected annual revenue from this machine is $50,000 and expected annual operating cost is $10,000. The equipment will be depreciated based on a Straight Line method over a seven-year life toward a zero salvage value. MAC is expecting to sell the equipment at $8,000 at the end of the seven years. Assuming tax rate of 40 percent calculate the following: • a. First cost (P) • b. Net annual cash flow (NACF) • c. Terminal cash flow (TCF)
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