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1 . Riker Chrome Plating is considering the purchase of a new chemical bath to improve its production efficiency. Relevant information about the purchase follows:
Riker Chrome Plating is considering the purchase of a new chemical bath to improve its production efficiency. Relevant information about the purchase follows:
Cost including installation $
Useful life years
Annual pretax cost savings $
Salvage value $
Depreciation method Straightline
Unrecoverable initial net working capital $
Unrecoverable net working capital per succeeding year $
Variable cost of annual pretax cost savings
Fixed cost $
Riker has a tax rate of percent and its discount rate is percent.
a Prepare a schedule showing the aftertax cash flows that are associated with the purchase over its useful life. Assume, with the exception of the net working capital requirement in the terminal year, all cash flows occur at the end of each year.
b Compute the return that will be earned if the purchase is made.
In working on a bid project, you have determined that $ of fixed assets will be required and that they will be depreciated straightline to zero over the year life of the project. You have also determined that the discount rate should be percent and the tax rate will be percent. In addition, the annual cash costs will be $ After considering all of the projects cash flows you have determined that the required operating cash flow is $ Compute the amount of annual sales revenue required.
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