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In: Finance
ABC, Inc. purchased an equipment at time=0 for $53,474. The shipping and installation costs were $23,977....
ABC, Inc. purchased an equipment at time=0 for $53,474. The shipping and installation costs were $23,977. The equipment is classified as a 5-year MACRS property. The investment in net working capital at time=0 was $5,040 which would be recouped at the end of the project. The project life is five years. At the end of the fifth year, the company will sell the equipment for $43,842. The annual cash flows are $43,724. What is the cash flow of the project in Year 5? That is, solve for CF5. Assume that the tax rate is 23% The MACRS allowance percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent. Note: In the last year of the project, the Total Cash Flow = Operating Cash Flow + Terminal Cash Flow
Solutions
jeff jeffy answered 1 month agoRelated Solutions
The equipment cost (equipment plus shipping and installation) can be depreciated at the rate of 21%...
The equipment cost (equipment plus shipping and installation)
can be depreciated at the rate of 21% in the first year. For the
remaining 5 years (years 2-6) the depreciation will be equal to
$30,000 per year. What is the amount of depreciation in year 1?
Years 0 1 2 3 4 Investment Outlay Equipment cost ($350,000) Shipping and installation ($70,000)...
Years
0
1
2
3
4
Investment Outlay
Equipment
cost
($350,000)
Shipping
and installation
($70,000)
Increase
in inventory
($55,000)
Increase
in accounts payable
$18,000
Total
initial investment
($457,000)
Operating
cash flow
$ 113,990
$
96,350
$ 140,450
$ 152,210
Total
termination cash flow
$
53,250
Project Cash Flows
Net cash flows
($457,000)
$113,990
$96,350
$140,450
$205,460
Required
return (used as the discount rate)
12%
Payback
period
(2.22)
Present
value of net cash inflows
Present
value of cash outflows
Profitability...
Benny Inc. is purchasing a new machine for $120,000 that includes all shipping/installation costs. The piece...
Benny Inc. is purchasing a new machine for $120,000 that
includes all shipping/installation costs. The piece of machinery
falls within the 5-year MACRs depreciation class. Benny Inc. sold
it after 4 years for $26,000. Their tax-rate is 30%
yr 1: 20%
yr 2: 32%
yr 3: 19.2%
yr 4: 11.52%
yr 5: 11.52%
yr 6: 5.76%
What is the after-tax salvage value? please show step by step
solutions w/ formula
• The required equipment would cost $160,000, plus an additional $35,000 for shipping and installation. •...
• The required equipment would cost $160,000, plus an additional
$35,000 for shipping and installation. • In addition, inventories
would rise by $26,000, while accounts payable would go up by
$6,000. All of these costs would be incurred at Year 0. (In other
words, increase net working capital is $25,000) • By a special
ruling, the machinery could be depreciated under the MACRS system
as 3-year property. Year 1 : 33%, Year 2: 45%, Year 3: 15%, Year 4:
7%...
The Strokes LLC. purchases equipment for 100,000 on 1/1/2016. Installation costs and testing costs were 10,000...
The Strokes LLC. purchases equipment for 100,000 on 1/1/2016.
Installation costs and testing costs were 10,000 and 5,000
respectively. Using the following information, answer the next two
questions. Estimated residual value is = $25,000 Useful life is = 8
years If the Strokes use sum of years digits method for recording
depreciation, what is the accumulated depreciation at the end of
2017 ? Assume December 31st year-end.
ABC Inc. purchased machinery and equipment in the amount of $125,000 on January 1, 2019. ABC...
ABC Inc. purchased machinery and equipment in the amount of
$125,000 on January 1, 2019. ABC will amortize this asset straight
line over 18 years, with no salvage value. For tax purposes these
assets are to be depreciated using a capital cost allowance rate of
15% each year of the original value (i.e. $125,000). ABC pays tax
at a rate of 35%.(reminder of half-net year rule).
Required:
a) What is the amount of the temporary difference between
straight line depreciation...
A company purchased new equipment for $270,000 including installation. The company estimates that the equipment will...
A company purchased new equipment for $270,000 including
installation. The company estimates that the equipment will have a
residual value (salvage value) of $24,000 and estimates it will use
the machine for six years or about 12,000 total hours.
Prepare a depreciation schedule for three years using the
following methods:
Straight line
Activity based
Actual use per year was as follows:
Year
Hours Used
1
3,100
2
1,100
3
1,200
2. Assume the equipment was purchased on August 1. What...
We bought a printing press for $750,000. We incurred $50,000 of installation costs, $23,000 in shipping...
We bought a printing press for $750,000. We incurred $50,000 of
installation costs, $23,000 in shipping and delivery costs. $5,000
in taxes and $24,000 in setup and testing. We determined that it
would make 5,000,000 impressions and would have a salvage value of
$45,000. During its first 4 years of operation we produced a. 1
650,000 impressions b. 2 700,000 impressions c. 3 600,000
impressions d. 4 500,000 impressions We decided to get out of this
line of business and...
On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping...
On January 1, 2014, Courier Inc. purchased new equipment that
had a total cost (including shipping and installation) of $82,000.
The equipment is expected to have a useful life of four years or
produce a total of 122,000 units. At the end of its life, the
equipment is expected to have a residual value of $4,900. The
equipment is expected to produce 25,620 units in 2014; 32,940 units
in 2015; 34,160 units in 2016; and 29,280 units in 2017. Courier...
On January 1, 2014, Courier Inc. purchased new equipment that had a total cost (including shipping...
On January 1, 2014, Courier Inc. purchased new equipment that
had a total cost (including shipping and installation) of $83,000.
The equipment is expected to have a useful life of four years or
produce a total of 123,000 units. At the end of its life, the
equipment is expected to have a residual value of $4,300. The
equipment is expected to produce 22,140 units in 2014; 31,980 units
in 2015; 31,980 units in 2016; and 36,900 units in 2017. Courier...
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