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 achance 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 andCurrent LiabilitiesAccrualsInventoryAccounts payableAccounts receivableCash- $19,300+49,300+40,900+ 69,4000a. 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 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.)Data table(Click on the icon here in order to copy the contents of the data table below into a spreadRounded Depreciation Percentages by Recovery Year Using MACRS forFirst Four Property ClassesRecovery year12346567891011Totals3 years33%45%15%7%Percentage by recovery year*5 years7 years20%14%32%19%12%12%5%25%18%18%12%12%9%9%9%4%100%100%100%*These percentages have been rounded to the nearest whole percent to simplify calculatioretaining realism. To calculate the actual depreciation for tax purposes, be sure to apply thunrounded percentages or directly apply double-declining balance (200%) depreciation usconvention.

The initial investment to be made in the projects depends on the purchase price of new machine and…

Answered: e to sell its 4-year-old roaster for…

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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Bartlett Car Wash Company is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $96,579 per year. Other information about this proposed project follows Initial investment $468,810 9 years Selvage value $ 47,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Bartlett Note: Round your percentage answer to 2 decimal places. 2. Calculate the payback period for Bartlett Note: Round your answer to 2 decimal places. 1. Accounting Rate of Retu 2. Payback Period years
Finance Steel PIc is selling an existing asset for $25,000. The asset was purchased three years ago at a cost of $100,000 and was depreciated based on the straight line method over a five-year life, which of the following is the tax benefit of this transaction, given a tax rate of 40%? a. $5,000 b. $7,000 c. $4,000 d. $6,000 An engineering company has a proposal to replace its existing machine with a new machine. The new machine costs $55,000 and has installation costs of $5,000. The machine will be depreciated using the straight-line method over five years. The new machine is expected to result in an incremental cost saving of $20.000. The firm has a 40% tax rate. The annual incremental after-tax cash flow from operations for year 1O a. $17,100O b. $15,500O c. $16,800O d. $14,700 A security analyst forecasts an expected return of 15% over the next year for Fenway Ltd's ordinary shares which have a beta of 1.5. If the risk-free rate is 4% and the market risk premium is 8%, which of…
ABC bought a piece of land in a highly developing area for a purchase price of P4,000,000. Directly attributable costs incurred was P250,000. If ABC were to resell this land now, it would incur cost to sell of P400,000. The following rates were gathered. Weighted average cost of capital 15% Land average price increase per year 18% Inflation rate 4% Required: Assuming that ABC plans to sell the asset by the end of the fifth year, compute the following: 1. Intrinsic value
Book value and taxes on sale of assets Troy Industries purchased a new machine 4 year(s) ago for $82,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule. Assume 21% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $98,400; $57,400; $13,940; and $9,800. a. The remaining book value is $ (Round to the nearest dollar.) 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 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…
After 10 years 2 properties flat 1 and flat 2 are sold. Their value has increased at an annual rate of 2.67% p.a. and capital gains taxes (CGT) are paid at a rate of 19% on the capital gains. The initial properties flat 1 and flat 2 were purchased by the investor for 450000 and 150000. a) what formulas would i use to calculate the final price of the properties after 10 years with the increase annual rate taken into consideration and what value do you get b) compute the NPV of the sale of each of the 2 flats , after capital gains taxes could you please explain what formuals i would use here and what method i should follow, not necessarily a value for b as not all the data in my spreadsheet i can attach
Project the OCFs for the next three years considering incomes of $165k, $170K and $180 respectively, and a depreciation of $15K, $16K and $18K respectively. Consider a tax of 25%. (Use the following format: "$11.111; $11.111; $11.111) Answer. $65.588;$69.325;$76.800 Then, calculate the NPV (of the three years projected, don't include the current one) if your investment is $150K and the cost of opportunity is 10% (use the following format: $11.111) Answer $24.619 Decide if you invest or not in this project (use the following format: "Yes" or "No") Answer NoI need the process please
Using (a) straight-line depreciation and (b) MACRS depreciation, complete the last four columns of the table below using an effective tax rate of 40 percent on an asset that has a first cost of $20,000 and a 3-year recovery period with no salvage value. Both cash flows are in units of $1000.
Explorer Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $28,800 Working capital 3,200 Operations (per year for 4 years): Cash receipts $20,000 Cash expenditures 8,800 Disinvestment: Salvage value of equipment $2,400 Recovery of working capital 3,200 Discount rate: 10 percent Additional information for interest rate of 10 percent and four time periods: Present value of $1 0.68301 Present value of an annuity of $1 3.16987 What is the net present value for the investment? Select one: a. $14,658 b. $35,503 c. $3,825 d. $7,327
4. Robert owns of RPM which involve in manufacturing business The cash flow profile of RPM Enterprise indicates that it made a capital investment of BD90,000 that generates an annual revenue of BD25,000 and an operating cost of BD3,500 yearly. Also, the value of its properties at the end of five (5) years is worth BD20,000. If MARR is 15% per annum compounded annually Show computation of Depreciation- any method will do such as SL, SF, DB, or Service Output if applicable
You buy a property for $100,000 in year 0. The building is depreciated using straight-line depreciation over 27.5 year. The NOI is $5,000 in year 1 and grows at 2% thereafter. The building is sold at a the end of year 4 at a terminal cap rate of 6%. Assume an ordinary income tax rate of 35%, a capital gains tax rate of 20%, and a depreciation recapture tax rate of 25%. What is going to be the total tax bill on the sale? O 1,187 O 1,959 O 3,146 O 3,636
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am Warren Company plans to depreciate a new building using the double declining balance depreciation method. The building cost is $780,000. The estimated residual value of the building is $48,000 and it has an expected useful life of 25 years. What is the building's book value at the end of the first year? Grew H Multiple Choice O $717,600 $62,400 $31,200 $33.850 < Prev

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