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Thread: CAPITAL BUDGETING - Net present value / NVP

  1. #1
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    CAPITAL BUDGETING - Net present value / NVP

    Hello to all,

    I am a bit confused and hoping for some help on this question. I have my final exam in a couple days and this was a review question provided by my lecturer. Unfortunately she is now extremely difficult to get a hold of.

    Guyana Revenue Authority is evaluating a new scanning machine. The machine requires an initial investment of $150,000. The expected return rate is 15% and will generate the following after tax inflows for the next seven (5) years.
    YEARS CASH INFLOWS
    1 $30,000
    2 $60,000
    3 20,000
    4 40,000
    5 50,000
    Annual maintenance cost and insurance cost will be 5 % and 10% of total cash inflows respectively in each of the five (5) years.

    I would like to know if should take the 5% and the 10% of each cash inflow PER YEAR, subtract that from the figures given above to give a new CASH INFLOW, and actually write that figure down under CASH OUTFLOWS when I draw my table, or am i going wrong here?
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  2. #2
    MHF Contributor
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    Re: CAPITAL BUDGETING - Net present value / NVP

    Quote Originally Posted by MekedaH View Post
    Hello to all,

    I am a bit confused and hoping for some help on this question. I have my final exam in a couple days and this was a review question provided by my lecturer. Unfortunately she is now extremely difficult to get a hold of.

    Guyana Revenue Authority is evaluating a new scanning machine. The machine requires an initial investment of \$150,000. The expected return rate is 15% and will generate the following after tax inflows for the next seven (5) years.
    YEARS CASH INFLOWS
    1 \$30,000
    2 \$60,000
    3 20,000
    4 40,000
    5 50,000
    Annual maintenance cost and insurance cost will be 5 % and 10% of total cash inflows respectively in each of the five (5) years.

    I would like to know if should take the 5% and the 10% of each cash inflow PER YEAR, subtract that from the figures given above to give a new CASH INFLOW, and actually write that figure down under CASH OUTFLOWS when I draw my table, or am i going wrong here?
    reposted to fix \$'s
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