Question
In: Finance
Use the information provided on Caterpillar Inc. to answer the following four parts: Caterpillar Inc. (CAT)...
Use the information provided on Caterpillar Inc. to answer the following four parts:
Caterpillar Inc. (CAT) is considering purchasing a new soil compactor for $300,000, and it would cost another $20,000 to modify it for special use by the firm. The company expended $40,000 traveling to various dealers in search of the new machine. The selected equipment falls into the MACRS 3-year class (33%, 45%, 15%, 7%), and could be sold after 3 years for $30,000. The equipment is expected to increase before-tax revenues by $200,000 per year, but annual costs will amount to $50,000. The firm's marginal federal-plus-state tax rate is 40% and its WACC is 10%.
a) What is the initial cash outflow for the expansion project?
-$300,000
-$340,000
-$320,000
-$360,000
None of the above
b) What is the depreciation outlay in the fourth year?
$22,400
$105,600
$0
$48,000
None of the above
c) What is the total cash inflow in year three?
$109,200
$136,160
$132,240
$147,600
None of the above
d) What is the net present value (NPV) for the expansion project and should the company accept or reject?
$24,500.68, Accept
$4,245.23, Accept
$24,500.68, Reject
$4,245.23, Reject
None of the above
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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CATERPILLAR INC. Statement of Income for a Recent Year
Total sales and revenues
......................................................................................
$55,184,000
Less: Cost of products sold
...................................................................................
$40,391,000
Gross profit
.......................................................................................,....................
$ 14,793,000
Less: Operating costs :
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Research and development expenses
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Other operating expenses
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Use the following information to answer the questions below. CATERPILLAR INC. Statement of Income for a...
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CATERPILLAR INC. Statement of Income for a Recent Year
Total sales and revenues
......................................................................................
$55,184,000
Less: Cost of products sold
...................................................................................
$40,391,000
Gross profit
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$ 14,793,000
Less: Operating costs :
Selling, general, and administrative expenses
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Research and development expenses
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$2,135,000
Other operating expenses
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$1,633,000
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Operating profit
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Less: Other expenses
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About Caterpillar Inc. The following is derived from the Caterpillar Inc. website: Caterpillar Inc. is a...
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