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I have just started studying for this exam, may sound silly question,I couldn’t figure out the cash inflow for year 5,
Purcase of an asset at the start of the year is 120,000. sale of the asset at the end of the project 25000, Depreciatin each year for 5 year is 19000. Contribution per annum 40000. Incremental cost is 10000.
Cash flow for 1st year is (120000)
Cashflow for 2nd-4th year 30000, (Contribution-FC) right?
Cash flow 5th year is 55000, How?
There is the contribution receipt of 40,000 less the extra cost of 10,000 plus the sale proceeds from the asset of 25,000. 40,000 – 10,000 + 25,000 = $55,00.
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