Question

Timco is considering the purchase of a new machine. The machine costs 34,000. It will cost 5000 to modify and install it. We will need to spend 4000 on net working capital. We also just spent 2000 on a new sign for our office building. Find the year zero cash flow for the machine

Answer 1

Answer:

year zero cash flow             38,000

Explanation:

the year zero cash flow will consider all the necessary cost to get the machine and the project associated with it ready for use:

machine cost:                       34,000

increase in working capital   4,000

year zero cash flow             38,000

the new sign in the office building is not a cost related to the project. It is not revelant therefore, we ignore it.