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Tax Rate Year 0 Year 1 Year 2 21.00% Year 3 Year 4 Year 5 Year 6 Sales of Old Vehicles $11,850.00 Old Vehicles Sale 3000 each New Van Costs (29850 each) Before Tax Cost Savings $149,250.00 $3,700.00 MACRS Rate Depreciation EBIT(Before tax cost savings-Depr) Tax =EBIT* Taxes Net Income =EBIT-Taxes Depreciation 20.00% $3,700.00 32.00% $3,700.00 $3,700.00 $3,700.00 19.20% $29,850.00 $47,760.00 $28,656.00 -$26,150.00 -$44,060.00 -$24,956.00 -$5,491.50 -$9,252.60 -$5,240.76 11.52% $17,193.60 11.52% $17,193.60 5.76% $8,596.80 -$13,493.60 -$13,493.60 -$8,596.80 -$2,833.66 -$2,833.66 -$1,805.33 Free Cash Flows -$137,400.00 -$20,658.50 -$34,807.40 -$19,715.24 $29,850.00 $47,760.00 $28,656.00 $9,191.50 $12,952.60 -$10,659.94 -$10,659.94 -$6,791.47 $17,193.60 $17,193.60 $8,596.80 $8,940.76 $6,533.66 $6,533.66 $1,805.33 Problem 12-15 Spreadsheet Problem: Project Cash Flows (LG12-5) Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing five fully- depreciated vans, which you think you can sell for $3,000 each and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? Note: Round your answers to the nearest dollar amount. Answer is complete but not entirely correct. Year 1 2 3 4 5 FCF $ (137,400) 9,192 $ 12,953 $ 8,941 $ 6,534 6,534 1,805

Tax Rate Year 0 Year 1 Year 2 21.00% Year 3 Year 4 Year 5 Year 6 Sales of Old Vehicles $11,850.00 Old Vehicles Sale 3000 each New Van Costs (29850 each) Before Tax Cost Savings $149,250.00 $3,700.00 MACRS Rate Depreciation EBIT(Before tax cost savings-Depr) Tax =EBIT* Taxes Net Income =EBIT-Taxes Depreciation 20.00% $3,700.00 32.00% $3,700.00 $3,700.00 $3,700.00 19.20% $29,850.00 $47,760.00 $28,656.00 -$26,150.00 -$44,060.00 -$24,956.00 -$5,491.50 -$9,252.60 -$5,240.76 11.52% $17,193.60 11.52% $17,193.60 5.76% $8,596.80 -$13,493.60 -$13,493.60 -$8,596.80 -$2,833.66 -$2,833.66 -$1,805.33 Free Cash Flows -$137,400.00 -$20,658.50 -$34,807.40 -$19,715.24 $29,850.00 $47,760.00 $28,656.00 $9,191.50 $12,952.60 -$10,659.94 -$10,659.94 -$6,791.47 $17,193.60 $17,193.60 $8,596.80 $8,940.76 $6,533.66 $6,533.66 $1,805.33 Problem 12-15 Spreadsheet Problem: Project Cash Flows (LG12-5) Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing five fully- depreciated vans, which you think you can sell for $3,000 each and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? Note: Round your answers to the nearest dollar amount. Answer is complete but not entirely correct. Year 1 2 3 4 5 FCF $ (137,400) 9,192 $ 12,953 $ 8,941 $ 6,534 6,534 1,805

Essentials Of Investments
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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Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing five fully-depreciated vans, which you think you can sell for $3,000 each and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? 

5 Year MACRS: year 1= 20%, year 2 = 32%, year 3 = 19.2%, year 4 = 11.52%, year 5 = 11.52%, year 6 = 5.76%

Ive figured years 0-5 correctly as shown in the screenshots, but the same formula does not work for year 6. 

Tax Rate Year 0 Year 1 Year 2 21.00% Year 3 Year 4 Year 5 Year 6 Sales of Old Vehicles $11,850.00 Old Vehicles Sale 3000 each New Van Costs (29850 each) Before Tax Cost Savings $149,250.00 $3,700.00 MACRS Rate Depreciation EBIT(Before tax cost savings-Depr) Tax =EBIT* Taxes Net Income =EBIT-Taxes Depreciation 20.00% $3,700.00 32.00% $3,700.00 $3,700.00 $3,700.00 19.20% $29,850.00 $47,760.00 $28,656.00 -$26,150.00 -$44,060.00 -$24,956.00 -$5,491.50 -$9,252.60 -$5,240.76 11.52% $17,193.60 11.52% $17,193.60 5.76% $8,596.80 -$13,493.60 -$13,493.60 -$8,596.80 -$2,833.66 -$2,833.66 -$1,805.33 Free Cash Flows -$137,400.00 -$20,658.50 -$34,807.40 -$19,715.24 $29,850.00 $47,760.00 $28,656.00 $9,191.50 $12,952.60 -$10,659.94 -$10,659.94 -$6,791.47 $17,193.60 $17,193.60 $8,596.80 $8,940.76 $6,533.66 $6,533.66 $1,805.33
Transcribed Image Text:Tax Rate Year 0 Year 1 Year 2 21.00% Year 3 Year 4 Year 5 Year 6 Sales of Old Vehicles $11,850.00 Old Vehicles Sale 3000 each New Van Costs (29850 each) Before Tax Cost Savings $149,250.00 $3,700.00 MACRS Rate Depreciation EBIT(Before tax cost savings-Depr) Tax =EBIT* Taxes Net Income =EBIT-Taxes Depreciation 20.00% $3,700.00 32.00% $3,700.00 $3,700.00 $3,700.00 19.20% $29,850.00 $47,760.00 $28,656.00 -$26,150.00 -$44,060.00 -$24,956.00 -$5,491.50 -$9,252.60 -$5,240.76 11.52% $17,193.60 11.52% $17,193.60 5.76% $8,596.80 -$13,493.60 -$13,493.60 -$8,596.80 -$2,833.66 -$2,833.66 -$1,805.33 Free Cash Flows -$137,400.00 -$20,658.50 -$34,807.40 -$19,715.24 $29,850.00 $47,760.00 $28,656.00 $9,191.50 $12,952.60 -$10,659.94 -$10,659.94 -$6,791.47 $17,193.60 $17,193.60 $8,596.80 $8,940.76 $6,533.66 $6,533.66 $1,805.33
Problem 12-15 Spreadsheet Problem: Project Cash Flows (LG12-5) Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing five fully- depreciated vans, which you think you can sell for $3,000 each and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? Note: Round your answers to the nearest dollar amount. Answer is complete but not entirely correct. Year 1 2 3 4 5 FCF $ (137,400) 9,192 $ 12,953 $ 8,941 $ 6,534 6,534 1,805
Transcribed Image Text:Problem 12-15 Spreadsheet Problem: Project Cash Flows (LG12-5) Your company is contemplating replacing their current fleet of delivery vehicles with Nissan NV vans. You will be replacing five fully- depreciated vans, which you think you can sell for $3,000 each and which you could probably use for another 2 years if you chose not to replace them. The NV vans will cost $29,850 each in the configuration you want them, and can be depreciated using MACRS over a 5-year life, but you are unable to make use of either bonus depreciation or Section 179 expensing. Expected yearly before-tax cash savings due to acquiring the new vans amounts to about $3,700 each. If your cost of capital is 8 percent and your firm faces a 21 percent tax rate, what will the cash flows for this project be? Note: Round your answers to the nearest dollar amount. Answer is complete but not entirely correct. Year 1 2 3 4 5 FCF $ (137,400) 9,192 $ 12,953 $ 8,941 $ 6,534 6,534 1,805
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