Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's tax rate is 40%. Management requires a minimum rate of return of 10% on all investments. What is the annual after tax cash flow (AATCF)for Year 1 from the investment

The annual after tax cash flow (AATCF) for Year 1 from the investment is $63,936

Explanation:

Given:

Revenues  = $ 200,000

Expenses  = $ 80,000

Depreciation  = $ 60,000

Net Profit before taxes  = $ 60,000

Tax at 40%  = $ 24,000

Net Profit after taxes  = $ 36,000

Depreciation  = $ 60,000

Cash Flow after taxes  = $ 96,000

NPV= ∑ {Periodical Cash Flow / } - Initial Investment

Here,

Initial Investment = $300,000

After Tax rate of Return = 10%

Time Period = 5 Years

Periodical Cash Flow :-

Present value of the Cash Flow after taxes = Cash Flow X PVAF of 10% for 5 Years

= $96,000 × 3.791

= $ 363,936

NPV = Initial Investment - PV of cash Flow

NPV = $363,936 - $300,000

NPV = $63,936

if you use only 25 for your entertainment and only 200 for the groceries that you really need and take out the 50 per month for the computer then that should be enough

it's actually a very difficult task, due to not many people can make 2 million dollars in 2 years. besides that, to the not-so-realistic ideas, you can create a business. it could be practically anything, but make it into a business that isn't that known yet, you get me? also, lets not forget about stock market. that's where all the good stuff happens. use investments at the beginning and begin to raise up your business or whatever you're going to do. as this is a very non-realistic idea, it's still worth the shot!