A laser company plans to receive $35,000 each year for 15 years from sales of a...

A laser company plans to receive $35,000 each year for 15 years from sales of a product. An initial investment of $210,000 will be required to manufacture the product. Expenses will cost $6,000 annually. With no salvage value and straight-line depreciation is being used, the income tax rate is about 48%. The MARR is expected to be at 10%. Thus, the BTCF for year 1 to 15 is always $29,000.

true or false

Expert Solution

Initial investment is in year 0 hence does not affect cash flow for years 1 to 15.

There is no salvage value.

Depreciation is not a cash flow item

Tax is not considered in BTCF.

Hence the BTCF for years 1 to 15 is Sales-Expenses.

Given, yearly sales= $35,000 and yearly expenses= $6,000

Therefore, BTCF for years 1 to 15 is allways 35,000-6,000 = $29,000

The statement is TRUE.

jeff jeffy answered 2 years ago

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A laser company plans to receive $35,000 each year for 15 years from sales of a...

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