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The following refers to a purchase of a machine by a company on January 1, 2016

Salvage Value: $7,500

Life: 6 years

Desired Rate of Return 4%

Interest Compounded: semi-annually

The maximum amount the company can pay is $32,348



What is the semi-annual net cash flow the company must achieve in order for the purchase to be made?

Respuesta :

The semi-annual net cash flow the company must achieve in order for the purchase to be made is $2500.

How to calculate the cash flow?

Number of period = 6 × 2 = 12

Rate = 4% / 2 = 2%

Annual cash flow × PVIFA × (2% × 12) + $7500 × PVIF(2%,12) - $32348 = 0

Annual cash flow × 10.5753 = $32348 - $7500 × 0.7885

Annual cash flow × 10.5753 = $32348 - $5914

Annual cash flow × 10.5753 = $26434

Annual cash flow = 26434/10.5753

Annual cash flow = $2500

Learn more about cash flow on:

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