Calculating initial cash flow DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $140,000. The firm has a chance to sell its 5-year-old roaster for $34,200. The existing roaster originally cost $60,300 and was being depreciated using MACRS and a 7-year recovery period (see the table). DuPree is subject to a 21% tax rate. a. What is the book value of the existing roaster? b. Calculate the after-tax proceeds of the sale of the existing roaster. c. Calculate the change in net working capital using the following figures: Anticipated Changes in Current Assets and Current Liabilities Accruals Inventory Accounts payable Accounts receivable - $19,000 +49,600 +40,700 +69,100 a. The remaining book value of the existing roaster is $. (Round to the nea b. The after-tax proceeds of the sale of the existing roaster will be $. (Rour c. The change in net working capital will be $. (Round to the nearest dollar d. The initial cash flow associated with the proposed new roaster will be $ Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 5 6 3 years 33% 45% 15% 7% 7 8 9 10 11 Totals Percentage by recovery year* 5 years 20% 32% Print 19% 12% 12% 5% 8% 7% 6% 6% 6% 4% 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. 7 years 14% 25% 18% 12% 9% Done 10 years 10% 18% 14% 12% 9% 9% 9% 4%
Calculating initial cash flow DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $140,000. The firm has a chance to sell its 5-year-old roaster for $34,200. The existing roaster originally cost $60,300 and was being depreciated using MACRS and a 7-year recovery period (see the table). DuPree is subject to a 21% tax rate. a. What is the book value of the existing roaster? b. Calculate the after-tax proceeds of the sale of the existing roaster. c. Calculate the change in net working capital using the following figures: Anticipated Changes in Current Assets and Current Liabilities Accruals Inventory Accounts payable Accounts receivable - $19,000 +49,600 +40,700 +69,100 a. The remaining book value of the existing roaster is $. (Round to the nea b. The after-tax proceeds of the sale of the existing roaster will be $. (Rour c. The change in net working capital will be $. (Round to the nearest dollar d. The initial cash flow associated with the proposed new roaster will be $ Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 5 6 3 years 33% 45% 15% 7% 7 8 9 10 11 Totals Percentage by recovery year* 5 years 20% 32% Print 19% 12% 12% 5% 8% 7% 6% 6% 6% 4% 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention. 7 years 14% 25% 18% 12% 9% Done 10 years 10% 18% 14% 12% 9% 9% 9% 4%
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
Problem 1PS
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Transcribed Image Text:Calculating initial cash flow DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be
$140,000. The firm has a chance to sell its 5-year-old roaster for $34,200. The existing roaster originally cost $60,300 and was being depreciated using MACRS and a 7-year recovery period (see
the table). DuPree is subject to a 21% tax rate.
a. What is the book value of the existing roaster?
b. Calculate the after-tax proceeds of the sale of the existing roaster.
c. Calculate the change in net working capital using the following figures:
Anticipated Changes in Current Assets and
Current Liabilities
Accruals
Inventory
Accounts payable
Accounts receivable
- $19,000
+49,600
+40,700
+ 69,100
(Round to the nea
a. The remaining book value of the existing roaster is $
b. The after-tax proceeds of the sale of the existing roaster will be $
(Rour
c. The change in net working capital will be $ . (Round to the nearest dollar
d. The initial cash flow associated with the proposed new roaster will be $
Data table
(Click on the icon here in order to copy the contents of the data table below into a spreadsheet.)
Rounded Depreciation Percentages by Recovery Year Using MACRS for
First Four Property Classes
10 years
10%
18%
14%
12%
9%
8%
7%
6%
6%
6%
4%
100%
100%
100%
100%
*These percentages have been rounded to the nearest whole percent to simplify calculations while
retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual
unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year
convention.
Recovery year
1
23
4
5
6
7
8
9
10
11
Totals
3 years
33%
45%
15%
7%
Percentage by recovery year*
5 years
7 years
14%
20%
32%
25%
19%
18%
12%
12%
12%
9%
5%
9%
9%
4%
Print
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