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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 $139,000. The firm has a chance to sell its 4-year-old roaster for $35,200. The existing roaster originally cost $59,400 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 -$19,300 +49,300 +40,900 +69,400 0 +15,300 Cash Notes payable d. Calculate the initial cash flow associated with the proposed new roaster.

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 $139,000. The firm has a chance to sell its 4-year-old roaster for $35,200. The existing roaster originally cost $59,400 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 -$19,300 +49,300 +40,900 +69,400 0 +15,300 Cash Notes payable d. Calculate the initial cash flow associated with the proposed new roaster.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $139,000. The firm has a chance to sell its 4-year-old roaster for $35,200. The existing roaster originally cost $59,400 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 - $19,300 +49,300 +40,900 +69,400 Cash Notes payable d. Calculate the initial cash flow associated with the proposed new roaster. 0 +15,300 a. The remaining book value of the existing roaster is $ (Round to the nearest dollar.) b. The after-tax proceeds of the sale of the existing roaster will be $ 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 $. (Round to the nearest dollar.) (Round to the nearest dollar.)
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 $139,000. The firm has a chance to sell its 4-year-old roaster for $35,200. The existing roaster originally cost $59,400 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 - $19,300 +49,300 +40,900 +69,400 Cash Notes payable d. Calculate the initial cash flow associated with the proposed new roaster. 0 +15,300 a. The remaining book value of the existing roaster is $ (Round to the nearest dollar.) b. The after-tax proceeds of the sale of the existing roaster will be $ 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 $. (Round to the nearest dollar.) (Round to the nearest dollar.)
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