Calculating initial investment DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $131,000. The firmhas a chance to sell its 4-year-old roaster for $35,900. The existing roaster originally cost $59,000 and was being depreciated using MACRS and a 7-year recovery period (see the table EDuPree is subject to a40% 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 andCurrent Liabilities- $19,600+51,000AccrualsInventoryAccounts payable+ 39,800Accounts receivable+ 69,500a. The remaining book value of the existing roaster is $(Round to the nearest dollar.)

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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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Bottoms up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,600 and sell its old washer for $900. The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 20% and the firms tax rate is 21%. a) if the firm uses straight-line depreciation over a 6 year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (negative amounts should be indicated by a minus sign.) annual operating cash flow in year 0? annual operating cash flow in years 1 to 6? b) what is the project NPV? (Do not round intermediate calculations. round answer to 2 decimal places. c) what is the NPV if the investment is entitled to immediate 100% bonus depreciation? (do not round intermediate calculations. round your answer to 2 decimals places.
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 Cash - $19,300 +49,300 +40,900 + 69,400 0 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 $. (Round to the nearest dollar.) c. The change…
New-Project Analysis The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $63,000, and it would cost another $19,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $26,800. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for the straight-line method.) Use of the equipment would require an increase in net working capital (spare parts inventory) of $2,320. The machine would have no effect on revenues, but it is expected to save the firm $19,960 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 25%. Cash outflows and negative NPV value, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest…
1. Determine the NPV of the new computer system (use 3 decimal places for the PV factor)
BAS Companies would like to construct and operate a new gaming facility. In addition to the capital expenditures on the facility, management estimates that the project will require an investment today of $175,000 in net working capital. The firm will recover the investment in net working capital fifteen years from today, when management anticipates closing the facility. The discount rate for this type of cash flow is 8% per year. Calculate the present value of the cost of working capital for the ice skating rink.
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Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $11.45 million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 46,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Payback period Current (no automation) 87,000 units years Per Unit $92 $19 25 9 53 $39 Total $ ? ? $ 1,100,000 ? Proposed (automation) 133,000 units Per Unit $92 $19 ? 9 ? $44 Total $ ? 3. Determine the project's payback period. (Round your answer to 2 decimal places.) ? $ 2,330,000 ?
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Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $7.52 million, and the equipment has a useful life of 6 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials. Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 81,000 Proposed (automation) 128,000 units units Net present value Per Unit $94 $ 17 30 9 56 $ 38 Total $ ? ? 1,240,000 ? Per Unit $94 $ 17 ? 9 ? $44 Total $? ? 2,200,000 ? Required: 5. Recalculate the NPV using a 9 percent discount rate. (Future Value of $1. Present Value of…
Required information [The following information applies to the questions displayed below] Beacon Company is considering automating its production facility. The initial investment in automation would be $6.20 million, and the equipment has a useful life of 5 years with a residual value of $1,100,000. The company will use straight- line depreciation. Beacon could expect a production increase of 31,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 88,000 units Net present value Per Unit $93 $16 12124 25 52 $ 41 Total $7 7 1,090,000 2 Proposed (automation) 119,000 units Per Unit $93 $ 16 7 11 ? $46 Total $7 7 2,280,000 2 Required: 5. Recalculate the NPV using a 9 percent discount rate. (Future Value of $1. Present Value of…

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