$54,200 is required to start a project. Before investing the cash I must see if it is worth it with the following info:
* has an expected life of five years and will generate after-tax cash flows to the company as a whole of $20,608 at the end of each year over its five-year life
* besides the $20,608 cash flows from operations during the fifth and final year, there will be an additional cash inflow of $13,200 at the end of the fifth year associated with the salvage value of the machine, making the cash flow in year 5 equal to $33,808
* cash flows associated with this project look like this:
The solution looks at different proposals to start a project and decides which to accept. It looks at the after-tax cash flows to the company and operations.