The initial operating cash inflow is 20000 and it

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Unformatted text preview: cash inflows of $10,000 per year for the first 5 years. At the end of year 5, a machine overhaul costing $20,000 will be required. After it is completed, expected operating cash inflows will be $10,000 in year 6; $7,000 in year 7; $4,000 in year 8; and $1,000 in year 9, at the end of which the machine will be scrapped. Situation C Invest in any or all of the four machines whose relevant cash flows are given in the following table. The firm has $500,000 budgeted to fund these machines, all of which are known to be acceptable. Initial investment for each machine is $250,000. Operating cash inflows Year Machine 1 Machine 2 Machine 3 Machine 4 1 $ 50,000 $70,000 $65,000 $90,000 2 70,000 70,000 65,000 80,000 3 90,000 70,000 80,000 70,000 4 30,000 70,000 80,000 60,000 5 100,000 70,000 20,000 50,000 For each situation, indicate: a. Whether the projects involved are independent or mutually exclusive. b. Whether the availability of funds is unlimited or capital rationing exists. c. Whether accept–reject or ranking decisions are required. d. Whether each pr...
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