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Calculating initial investment Dupree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be

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Calculating initial investment Dupree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $ 120,000. The firm has a chance to sell its 33-year-old roaster for $34,600. The existing roaster originally cost $59,700 and was being depreciated using MACRS and a 7-year recovery period (see the table below) Dupree is subject to a 40% 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 -$19,400 Inventory 49,000 Accounts payable 39,000 Accounts receivable 69,600 Cash 00 Notes payable 14,800 d. Calculate the initial investment associated with the proposed new roaster. Table.... NO 199 14% 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 33% 20% 14% 10% 45% 32% 25% 18% 15% 18% 7% 12% 12% 12% 12% 9% 9% 5% 9% 9% 4% 6% 6% 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention 89 6% 000 Calculating initial investment Dupree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $ 120,000. The firm has a chance to sell its 33-year-old roaster for $34,600. The existing roaster originally cost $59,700 and was being depreciated using MACRS and a 7-year recovery period (see the table below) Dupree is subject to a 40% 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 -$19,400 Inventory 49,000 Accounts payable 39,000 Accounts receivable 69,600 Cash 00 Notes payable 14,800 d. Calculate the initial investment associated with the proposed new roaster. Table.... NO 199 14% 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 33% 20% 14% 10% 45% 32% 25% 18% 15% 18% 7% 12% 12% 12% 12% 9% 9% 5% 9% 9% 4% 6% 6% 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention 89 6% 000

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