Question
Calculating initial cash flowDuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be
Calculating initial cash flowDuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be
$131,000.
The firm has a chance to sell its
5-year-old
roaster for
$34,900.
The existing roaster originally cost
$61,000
and was being depreciated using MACRS and a 7-year recovery period (see the table
LOADING...
). DuPree is subject to a
21%
tax rate.
a. What is the book value of the existing roaster?
b. Calculate the after-tax proceeds of the sale of the existing roaster.
c. Calculate the change in net working capital using the following figures:
Anticipated Changes in Current Assets and Current Liabilities | |
Accruals | $21,000 |
Inventory | +50,900 |
Accounts payable | +40,600 |
Accounts receivable | +70,400 |
Cash | 0 |
Notes payable | +15,700 |
d. Calculate the initial cash flow associated with the proposed new roaster.
Question content area bottom
Part 1
a. The remaining book value of the existing roaster is
$enter your response here.
(Round to the nearest dollar.)
Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes | ||||
Percentage by recovery year* | ||||
Recovery year | 3 years | 5 years | 7 years | 10 years |
1 | 33% | 20% | 14% | 10% |
2 | 45% | 32% | 25% | 18% |
3 | 15% | 19% | 18% | 14% |
4 | 7% | 12% | 12% | 12% |
5 | 12% | 9% | 9% | |
6 | 5% | 9% | 8% | |
7 | 9% | 7% | ||
8 | 4% | 6% | ||
9 | 6% | |||
10 | 6% | |||
11 | 4% | |||
Totals | 100% | 100% | 100% | 100%
|
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