Question
Calculating initial investmentDuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $123,000.
Calculating initial investmentDuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $123,000. The firm has a chance to sell its 4-year-old roaster for $34,500. The existing roaster originally cost $59,200and was being depreciated using MACRS and a 7-year recovery period DuPree is subject to a 40% tax rate.
Anticipated Changes in Current Assets and Current Liabilities
Accruals: -$20,100
Inventory: +50,100
Accounts payable: +40,300
Accounts receivable: +69,600
Cash: 0
Notes payable: +15,300
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:
d. Calculate the initial investment associated with the proposed new roaster.
|
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% | |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started