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ADAM COMPANY HAS AN THAT COST WHEN PURCH THE FIRM DEPRECIATION MACRS FOR 3 YEARS (PER Y1-33% Y2 45%, Y3-15% Y EXPECTED SELLING PRIC MACHINE IS 65000

ADAM COMPANY HAS AN THAT COST WHEN PURCH THE FIRM DEPRECIATION MACRS FOR 3 YEARS (PER Y1-33% Y2 45%, Y3-15% Y EXPECTED SELLING PRIC MACHINE IS 65000

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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ADAM COMPANY HAS AN OLD MACHINE THAT COST WHEN PURCHASED $130000, THE FIRM DEPRECIATION METHOD IS MACRS FOR 3 YEARS (PERCENTAGED Y1-33% Y2 45%, Y3=15% Y4=7%) THE EXPECTED SELLING PRICE OF THE OLD MACHINE IS 65000 ADAM CAN BUY A NEW MACHINE WITH PRICE $170000 AND INSTALLATION COST OF $7000 AND SHIPPMENT S 4000 IT WILL ALSO BE DEPRECIATED USING MACRS. THE MACHINE REQUIRES RECEIVABLES TO INCREASE 12400 INVENTORY 20000 AND ACCOUNT PAYABLE WILL INCREASE BY $16000 REVENUES ARE EXPECTED TO BE 130000 AND EXPENSES ARE 60% OF REVENUES FOR THE 3 YEARS IF THE NEW MACHINE CAN BE SOLD AT THE END OF THE 3 YEARS FOR $26000 AND TAXES IS 38%,K IS 0.09 WHAT IS THE INITIAL INVESTMENT? WHAT IS THE DISCOUNTED OPERATING CASH FLOW FOR THE 3 YEARS ? WHAT IS THE TERMINAL VALUE? WHAT IS THE NPV?
Transcribed Image Text:ADAM COMPANY HAS AN OLD MACHINE THAT COST WHEN PURCHASED $130000, THE FIRM DEPRECIATION METHOD IS MACRS FOR 3 YEARS (PERCENTAGED Y1-33% Y2 45%, Y3=15% Y4=7%) THE EXPECTED SELLING PRICE OF THE OLD MACHINE IS 65000 ADAM CAN BUY A NEW MACHINE WITH PRICE $170000 AND INSTALLATION COST OF $7000 AND SHIPPMENT S 4000 IT WILL ALSO BE DEPRECIATED USING MACRS. THE MACHINE REQUIRES RECEIVABLES TO INCREASE 12400 INVENTORY 20000 AND ACCOUNT PAYABLE WILL INCREASE BY $16000 REVENUES ARE EXPECTED TO BE 130000 AND EXPENSES ARE 60% OF REVENUES FOR THE 3 YEARS IF THE NEW MACHINE CAN BE SOLD AT THE END OF THE 3 YEARS FOR $26000 AND TAXES IS 38%,K IS 0.09 WHAT IS THE INITIAL INVESTMENT? WHAT IS THE DISCOUNTED OPERATING CASH FLOW FOR THE 3 YEARS ? WHAT IS THE TERMINAL VALUE? WHAT IS THE NPV?
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