21- The manager at Vastine Medico is considering a new computer system. The purchase price of the computer system is $40,000. The CFO decided that the computer system can be classified in the MACRS 3-year class. The computer system will require a $3,000 investment in net working capital. The computer system is expected to increase sales by $40,000 per year and raise operating costs by $25,000 annually. After three years, the computer system will be sold for $25,000. Investors demand a required rate of return of 13% and Vastine Medico tax rate is 40%. MACRs Depreciation Schedule Year 1 2 3 4 5 6 3 Year Class 33% 45% 15% 7% 5 Year Class 20% 32% 19% 12% 11% 6% What is the Operating Cash Flow in year 1?
21-
The manager at Vastine Medico is considering a new computer system. The purchase price of the computer system is $40,000.
The CFO decided that the computer system can be classified in the MACRS 3-year class. The computer system will require a $3,000 investment in net working capital.
The computer system is expected to increase sales by $40,000 per year and raise operating costs by $25,000 annually. After three years, the computer system will be sold for $25,000.
Investors demand a required
|
MACRs Depreciation Schedule |
||||||
|
Year |
1 |
2 |
3 |
4 |
5 |
6 |
|
3 Year Class |
33% |
45% |
15% |
7% |
|
|
|
5 Year Class |
20% |
32% |
19% |
12% |
11% |
6% |
What is the Operating Cash Flow in year 1?
22-
Which of the following make up the
I. Purchase price
II. Shipping and Installation
III. Change in net working capital
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
