abc engines,inc must develop the relevant cash flow a for a replacement capital investment project that will take place at the beginning of 2020. the proposed assets costs $600,000 and has installation costs of $30,000. this is a 5 year project from 2020 to 2024
MACRS RATE Calculation: 100%, (10% each question) Write down your answers in the bluebook. You have to show me your work to get credits. Calculate the numbers based on the information provided below. ABC Engines, Inc. must develop the relevant cash flows for a replacement capital imestament sroject that will take place at the beginning of 2020 The proposed asset costs $600,000 and has installation costs of $10.000 This is a 5-year project from 2000 to 2024. The proposed equipment will be depreciated using a five-year recovery schedule and will be sold at the end of 2024 (the 5 year for $300.000. The existing equipment, which originally cost $150,000 when it was purchased at the beginning of 2017 and will be sold for $200,000 now or $50.000 at the end of 2024 (the 5 year). has been depreciated using an MACRS five-year recovery schedule and three years of depreciation (2017. 2018, and 2019) has already been taken. The new equipment is required to invest $25,000 networking capital at the beginning and the $25,000 net working capital will be recovered by the end 2024 Earnings before depreciation and taxes for the existing equipment is $140,000 per year in 2020 to 2024 and earnings before depreciation and taxes for the proposed new equipment is $230,000 per year for 5 years from 2020 to 2024. The firm's weighted average cost of capital is 10% The firm has a 40 percent tax rate. hat's Pat 1. What is the after-tax cash flow on the sale of the existing asset? How much is the initial investment if the company decides to replace the existing equipment with the proposed equipment? Compute the annual depreciation expenses for both existing equipment and proposed equipment from 2020 to year 2024 respectively. 4. Compute the annual operating cash flows for the existing equipment from year 2020 to year 2024 respectively. (Show your work with the operating cash flows table that I presented to you in class). 5. Compute the annual operating cash flows for the proposed new equipment from year 2020 to year 2024 respectively. (Show your work with the operating cash flows table that presented to you in class). 6. Compute the annual incremental after-tax cash flow from operations for year 2020 to 2024 7. What is the after-tax cash flow on the sale of the existing equipment at the end of 20247 8. What is the after-tax cash flow on the sale of the proposed equipment at the end of 20242 9. What is the terminal cash flow of this project? 10. Compute the NPV of this proposed project and determine if the company should accept the project? MACRS RATE Calculation: 100%, (10% each question) Write down your answers in the bluebook. You have to show me your work to get credits. Calculate the numbers based on the information provided below. ABC Engines, Inc. must develop the relevant cash flows for a replacement capital imestament sroject that will take place at the beginning of 2020 The proposed asset costs $600,000 and has installation costs of $10.000 This is a 5-year project from 2000 to 2024. The proposed equipment will be depreciated using a five-year recovery schedule and will be sold at the end of 2024 (the 5 year for $300.000. The existing equipment, which originally cost $150,000 when it was purchased at the beginning of 2017 and will be sold for $200,000 now or $50.000 at the end of 2024 (the 5 year). has been depreciated using an MACRS five-year recovery schedule and three years of depreciation (2017. 2018, and 2019) has already been taken. The new equipment is required to invest $25,000 networking capital at the beginning and the $25,000 net working capital will be recovered by the end 2024 Earnings before depreciation and taxes for the existing equipment is $140,000 per year in 2020 to 2024 and earnings before depreciation and taxes for the proposed new equipment is $230,000 per year for 5 years from 2020 to 2024. The firm's weighted average cost of capital is 10% The firm has a 40 percent tax rate. hat's Pat 1. What is the after-tax cash flow on the sale of the existing asset? How much is the initial investment if the company decides to replace the existing equipment with the proposed equipment? Compute the annual depreciation expenses for both existing equipment and proposed equipment from 2020 to year 2024 respectively. 4. Compute the annual operating cash flows for the existing equipment from year 2020 to year 2024 respectively. (Show your work with the operating cash flows table that I presented to you in class). 5. Compute the annual operating cash flows for the proposed new equipment from year 2020 to year 2024 respectively. (Show your work with the operating cash flows table that presented to you in class). 6. Compute the annual incremental after-tax cash flow from operations for year 2020 to 2024 7. What is the after-tax cash flow on the sale of the existing equipment at the end of 20247 8. What is the after-tax cash flow on the sale of the proposed equipment at the end of 20242 9. What is the terminal cash flow of this project? 10. Compute the NPV of this proposed project and determine if the company should accept the project
