Question: Michaels, Inc., purchased a machine for $75,000. The machine has a useful life of five years and no salvage value. Straight-line depreciation is to be used. The machine is expected to generate cash flow from operations, net of income taxes, of $25,000 in each of the five years. Michaels' expected rate of return is 10%. Information on present value factors is as follows:
| Period |
Present Value of $1 at 10% |
Present value of ordinary annuity of $1 at 10% |
| 1 |
0.90909 |
0.90909 |
| 2 |
0.82645 |
1.73554 |
| 3 |
0.75132 |
2.48685 |
| 4 |
0.68301 |
3.16986 |
| 5 |
0.62092 |
3.79079 |