You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS....

You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS. This machine generates $200,000 in annual revenue. In year 4, you sold the machine for $250,000. You received a loan for $400,000 on a 5 year loan at 5% (note, you must pay the remaining balance of this loan at the end of year 4 from the proceeds of the sale). In addition, you invested $80,000 in working capital initially. Your company is in a 35% tax bracket. MARR =15.36% Generate your cash flow analysis using Actual Dollars. In other words, inflate your revenue, salvage value, expenses and Working Capital accordingly. What is your Market NPW??inflation rate =3%?

Solutions

Expert Solution

The following are the data inputs in spreadsheet:

The following are the obtained results in spreadsheet:

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

1) You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year...

1) You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS. This machine generates $200,000 in annual revenue. In year 4, you sold the machine for $250,000. You received a loan for $400,000 on a 5 year loan at 5% (note, you must pay the remaining balance of this loan at the end of year 4 from the proceeds of the sale). In addition, you invested $80,000 in working capital initially. Your company is...

A new $110,000 machine will be depreciated using a 5-year MACRS schedule. It should generate $45,000...

A new $110,000 machine will be depreciated using a 5-year MACRS schedule. It should generate $45,000 per year in additional revenues, and $20,000 per year in additional cash operating costs per year. If the firm has a tax rate of 39%, calculate the year 4 incremental net operating cash flow. $28,891 $20,192 $41,927 $19,021 none of the above

"A company bought a machine for $138,000. The machine was depriciated using a 5 year MACRS...

"A company bought a machine for $138,000. The machine was depriciated using a 5 year MACRS approach. After 3 years, the machine was sold at a salvage value of $83,500. Assuming a tax rate of 27%, what are the net proceeds from the sale of the machine? (Hint: You will want to take your salvage values and add/subtract gains due to the sale.)"

An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT...

An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and money is worth 10% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes?

Three years ago, you purchased some 5-year MACRS equipment at a cost of $135,000. The MACRS...

Three years ago, you purchased some 5-year MACRS equipment at a cost of $135,000. The MACRS rates are 20 percent, 32 percent, 19.2 percent, 11.52 percent, 11.52 percent, and 5.76 percent for Years 1 to 6, respectively. You sold the equipment today for $82,500. Which of these statements is correct if your tax rate is 23 percent and you ignore bonus depreciation? Multiple Choice The tax due on the sale is $10,032.60. The book value today is $40,478. The book...

"You purchased an airplane for $450,000 and will depreciate it using a 7-year MACRS with a...

"You purchased an airplane for $450,000 and will depreciate it using a 7-year MACRS with a 5-year life. Salvage value in year 5 is expected to be $176,000. The airplane is expected to increase revenues by $144,000 per year. However, O&M costs are expected to be $29,000 per year. Your company is in the 21% tax bracket and your MARR is 18%. What is the Net Present Worth of this investment?"

"You purchased an airplane for $494,000 and will depreciate it using a 7-year MACRS with a...

"You purchased an airplane for $494,000 and will depreciate it using a 7-year MACRS with a 5-year life. Salvage value in year 5 is expected to be $188,000. The airplane is expected to increase revenues by $193,000 per year. However, O&M costs are expected to be $29,000 per year. Your company is in the 21% tax bracket and your MARR is 20%. What is the Net Present Worth of this investment?"

A six year project involves equipment costing $3,460,000 that will be depreciated using the seven-year MACRS...

A six year project involves equipment costing $3,460,000 that will be depreciated using the seven-year MACRS schedule. If the estimated pre-tax salvage value for the equipment at the end of the project's life is $553,600, what is the after-tax salvage value for the equipment? Assume a marginal tax rate of 21 percent. please show me how to do this by hand

A machine was purchased and installed in the beginning of year 2019. The estimated cost in...

A machine was purchased and installed in the beginning of year 2019. The estimated cost in the period stated dollars is below. The costs are in current period dollars at the end of the year. For example, 2020 cost is reported in end of year 2020 dollars. An inflation rate applicable to years 2020 and higher of 2.85% was used in the estimation process. What is the machine's Present Worth of costs including purchase amount in 2019 dollars using a...

A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on...

A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on a straight-line basis with an estimated useful life of nine years and a $50,000 residual value. At the beginning of 2024, the company revised the equipment’s useful life to a total of seven years (four more years) because of changing customer demand. The company also revised the expected residual value to $30,000. What depreciation expense would the company record for the year 2024 on...

Subjects