16 17 Part C. Annual Depreciation Tax Savings 18 Years 1 2 3 4 5 6 19 New Dep 2,220.00 3,552.00 2,131.20 1,278.72 1,278.72 639.36 Steamer cost: Tax Rate: 11,100.00 0.25 20 Old Dep 550 550 550 550 550 300 21 Change 1,670.00 3,002.00 1,581.20 728.72 728.72 339.36 22 Dep Tax Sav 417.50 750.50 395.30 182.18 182.18 84.84 23 24 222 25 Part D. inventory Year 6 Cash Flows increase minus 2,200.00 accounts 26 payable salvage value 1,700.00 27 28 LESS:taxes (425.00) LESS: opportunity 30 23 29 Cost (600.00) 2,875.00 Old steamer sold 800.00 for: taxes of 25% of the $800: 200.00 Part E. Years 0 Timeline & NPV Net Investment (9,867.50) After tax Revenue Increase Depreciation Tax Savings 1 2 3 4 5 6 2,775.00 2,775.00 2,775.00 2,775.00 2,775.00 2,775.00 417.50 750.50 395.30 182.18 182.18 Year 6 CF's 84.84 2,875.00 Cash Flow (9,867.50) 3,192.50 3,525.50 3,170.30 2,957.18 2,957.18 5,734.84 Keys 12% NPV: 4,029.27 D E F G H 1 Part A. A Purchase price of new 2 machine Sold old 3 machine B Net Cash Flow @t=0 (11,100.00) 3,560.00 Taxes on sale 4 of old machine (127.50) 5 Inventory (2,900.00) Increase in 6 Acct Payable 7 8 9 Part B. 700.00 (9,867.50) Annual Cash Flow 10 Sales Increase 2,000 11 Cost Decrease 1,700 Increase in pre 12 tax revenue 13 Calculate after tax 3,700 revenue 14 increase: 2,775.00 J K 3,050.00 book value