Mideque, inc. is considering a project to produce pens. it estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $15,000. The other yearly expense will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. the loan will be paid at the rate of $2,000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 50 percent.
Assume that this is a replacement project. The old equipment can be sold for $10,000. It was bought five years ago for $22,000 and assumed to last for 10 years.
Obtain the initial investment?
Obtain the annual cash flow of the last period?