KEVOS® MAKEOS · Money
Equipment Finance Plan (Loan Payment, Depreciation, Tax, Yearly Cash Flow)
If I borrow to buy this machine, does the saving it brings cover the loan payments each year once depreciation and tax are counted?
Yearly cash-flow plan for a machine bought with a loan: the level loan payment from the purchase price, rate and term (capital recovery factor as the interest and equivalence factors tool), the interest and principal in each payment, the depreciation in each year by straight line, sum of the years’ digits or double declining balance (as the depreciation schedule tool), tax on the saving less depreciation and interest, and the after-tax cash flow each year and in total, checked for any year with a shortfall.
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How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Machine cost | AUD | Price of the machine, all borrowed. |
| Salvage value at end of life | AUD | Value at the end of the depreciation life. |
| Depreciation life | years | Years over which the machine is depreciated. |
| Depreciation method | choice | Depreciation method. |
| Loan | ||
| Loan interest rate | % | Annual interest rate of the loan. |
| Loan term | years | Years over which the loan is repaid in equal annual payments. |
| Operation | ||
| Yearly operating saving or extra profit | AUD | Pre-tax saving or extra profit the machine brings each year. |
| Tax rate | % | Income tax rate on profit. |
Method and formulas
- Payment = cost × A/P with A/P = i(1 + i)ⁿ ÷ [(1 + i)ⁿ − 1] (as the interest and equivalence factors tool); interest = rate × opening balance.
- Depreciation by the chosen method (as the depreciation schedule tool).
- Tax = rate × (saving − depreciation − interest); cash flow = saving − payment − tax.
- Example: the loan costs 25,046 AUD a year; year 1 nets 3,754.4 AUD after tax and the worst year 1,910.9 AUD.
Limitations
- Annual payments and end-of-year cash flows; real loans are usually monthly.
- Tax treatment simplified: losses are assumed to offset other profit in the same year.
- Example values are illustrations. Replace them with values for your actual task.
Typical uses
- Test whether a financed machine pays its way each year
- Compare depreciation methods for cash flow
- Prepare a purchase case for a lender
Who it is for
- Business owners
- Finance managers
- Engineering managers
What you get
- Loan payment and interest each year
- Depreciation and tax each year
- After-tax cash flow each year and in total
Interpreting the result
- Accelerated depreciation helps early cash flow but leaves less to deduct later.
References
- Machinery’s Handbook, 29th edition (Industrial Press, 2012), printed pp. 134–140. Topic reference; no source tables or recommended settings are reproduced.
WORKOS tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.
Open the Equipment Finance Plan (Loan Payment, Depreciation, Tax, Yearly Cash Flow) calculator
