1.Homer Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $188,000. The equipment will have an initial cost of $416,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $86,000, what is the annual net cash flow?
A) $102,000
B) $122,000
C) $ 254,000
D) $274,000
2.Cortland Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flows of $183,000. The equipment will have an initial cost of $452,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $92,000, what is the annual net income? Ignore income taxes.
A) $111,000
B) $91,000
C) $255,000
D) $275,000