Question

Julio Company purchased a $200,000 machine that has a four-year life and no salvage value. The company uses straight-line depreciation on all asset acquisitions and is subject to a 30% tax rate. The proper cash flow to show in a discounted-cash-flow analysis as occurring at time 0 would be: $50,000. $(200,000). $(35,000). $(140,000). $15,000.

Answer 1

$(200,000)

Step-by-step explanation:

The cash flow to be shown in year is the initial investment outlay incurred prior to the commencement of the project since a new investment opportunity like this is seen as a project from which future cash flows are expected.

The amount expended today to ensure is $200,000 which would be shown in the discounted-cash-flow analysis as negative $200,000 because it is an outflow rather than an inflow that would have assumed a positive sign