Q4 Diva Dance Company, a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The firm pays 40 percent taxes on ordinary income and capital gains. The information of the existing and proposed machine are shown in Table Q4. Year Table Q4: Information for existing and new machine 1 2 3 4 5 Existing Machine Cost RM100,000 • Purchased 2 years ago • Depreciation using MACRS over a 5-year recover schedule • Five year usable life remaining Earnings before depreciation and taxes 160,000 150,000 140,000 Proposed Machine Cost = RM150,000 Installation = RM20,000 Depreciation using MACRS over a 5-year recover schedule Five year usable life expected 170,000 170,000 170,000 170,000 170,000 a) Prepare the incremental cash flow Schedule based on data in table Q4 140,000 140,000
Q4 Diva Dance Company, a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The firm pays 40 percent taxes on ordinary income and capital gains. The information of the existing and proposed machine are shown in Table Q4. Year Table Q4: Information for existing and new machine 1 2 3 4 5 Existing Machine Cost RM100,000 • Purchased 2 years ago • Depreciation using MACRS over a 5-year recover schedule • Five year usable life remaining Earnings before depreciation and taxes 160,000 150,000 140,000 Proposed Machine Cost = RM150,000 Installation = RM20,000 Depreciation using MACRS over a 5-year recover schedule Five year usable life expected 170,000 170,000 170,000 170,000 170,000 a) Prepare the incremental cash flow Schedule based on data in table Q4 140,000 140,000
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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Transcribed Image Text:Q4
Diva Dance Company, a manufacturer of dance and exercise apparel, is considering
replacing an existing piece of equipment with a more sophisticated machine. The firm
pays 40 percent taxes on ordinary income and capital gains. The information of the
existing and proposed machine are shown in Table Q4.
Year
Table Q4 : Information for existing and new machine
1
2
3
4
5
Existing Machine
• Cost = RM100,000
• Purchased 2 years ago
• Depreciation using
MACRS over a 5-year
recover schedule
• Five year usable life
remaining
Earnings before depreciation and taxes
160,000
150,000
Proposed Machine
Cost = RM150,000
Installation = RM20,000
Depreciation using
MACRS over a 5-year
recover schedule
• Five year usable life
expected
140,000
140,000
140,000
170,000
170,000
170,000
170,000
170,000
a) Prepare the incremental cash flow Schedule based on data in table Q4
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