Chapter 6 Asset Investment Decisions and Capital Rationing

The only cash flows that we need to consider are those which will be affected by the choice of the method of financing. The operating savings of $8,000 a year, and the tax on these savings, can be ignored. (a) The present value of purchase costs. Year. Item. Cash flow. DF 9%. PV $ $ 0 Equipment (20,000) 1 (20,000) 5 Trade-in value. 4,000 0.65 ... ................
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