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

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter12: Liabilities: Off-balance-sheet Financing, Retirement Benefits, And Income Taxes

Section: Chapter Questions

Problem 26E

See similar textbooks

Related questions

Question

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

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

Expert Solution

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here