Question
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
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 5 -year-old roaster for $34,000. The existing roaster originally cost $59,400 and was being depreciated straight-line over 7 years. DuPree pays taxes at a rate of 40% .
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 Inventory Accounts payable Accounts receivable Cash Notes payable
d. Calculate the initial investment associated with the proposed new roaster.
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