Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,500 and sell its old washer for $2,000. The new washer will last for 6 years and save $2,000 a year in expenses. The opportunity cost of capital is 16%, and the firm's 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.) b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Annual operating cash flow in year 0 5,920 a. Annual operating cash flow in years 1 to 6 $ 1,843 b. NPV $ 869.13 c. NPV $ 1,476.88 Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,500 and sell its old washer for $2,000. The new washer will last for 6 years and save $2,000 a year in expenses. The opportunity cost of capital is 16%, and the firm's 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.) b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Annual operating cash flow in year 0 5,920 a. Annual operating cash flow in years 1 to 6 $ 1,843 b. NPV $ 869.13 c. NPV $ 1,476.88
Expert Answer:
Answer rating: 100% (QA)
a To calculate the cash flows for each year we need to consider the initial investment the savings i... View the full answer
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781259087585
6th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts
Posted Date:
Students also viewed these finance questions
-
Find the most recent 10-k filing of a company that you own stock in or a company you are interested in investing in. Then give a brief description of what type of company ( service, retail,...
-
You are a lead auditor from ABC Auditors Pty Ltd. Your client is Cassey's Quality Cars Ltd who are a large car dealership with branches across Queensland. ABC Auditors have performed audits for past...
-
(a) What factors should a company consider when choosing among the straight-line, diminishing-balance, or units-of-production depreciation methods? (b) When choosing between the cost model or...
-
The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the...
-
The working papers pertaining to the auditor's study of internal accounting control include the following preliminary evaluation: Up to the point at which the prenumbered sales invoices are prepared,...
-
Harry Ulmas made a contract to buy a new car from Acey Oldsmobile. He was allowed to keep his old car until the new car was delivered. The sales contract gave him a trade-in value of $650 on the old...
-
A. Describe what the formula P = M A E represents. B. What happens if one of these factors becomes deficient? C. In terms of performance, identify the four different types of reinforcement. Provide...
-
Write a function: string solution (string &S, string &T); that, given two strings S and T consisting of N and M characters, respectively, determines whether string T can be obtained from string S by...
-
Its for filling out a pretend 1040, schedule 3, schedule 8812, form 8863, and a schedule EIC. Filing as Head of Household with one dependant. Everything I have filled in so far is marked as correct,...
-
How do the managers of a business maintain its competitive position ?
-
What is the profitability index?
-
Hilarious take on high school in the land of Twitter, texting, and YouTube. Emma Stone, in a stunningly sharp depiction, plays a high schooler who begins to act out the Scarlet Letter, the famous...
-
In what circumstances can groups become too open? Too closed?
-
What is external capital rationing?
-
20. Supply and demand for a product are both a linear function of price. Suppose that if a price of $8 is charged, 8 units will be demanded, that if a price of $5 is charged, 20 units will be...
-
For the following exercises, find the inverse of the function and graph both the function and its inverse. f(x) = 4 x 2 , x 0
-
Financial leases make sense when the lessee faces a lower marginal tax rate than the lessor. Does this tax advantage carry over to operating leases?
-
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $20,000 and will be depreciated in an asset class that carries a CCA rate of 30%. It will be sold for...
-
An importer in Canada is due to take delivery of silk scarves from Europe in 6 months. The price is fixed in euros. Which of the following transactions could eliminate the importer's exchange risk?...
-
Research and explain a humanitarian initiative and cite the organizations involved, the logistics of the situation, and whether they were successful or not.
-
Review the methods used in the supplements, and then find a disruption or disaster situation that used one of these methods to model, understand, and evaluate alternative mitigation actions.
-
Research how a first responder or team of first responders handled a disruption or disaster. What skills did they need? What was the service window? Were they successful or not?
Front Office Management In Hospitality Lodging Operations 3rd Edition - ISBN: 1494943646 - Free Book
Study smarter with the SolutionInn App