CHAPTER 12: CAPITAL BUDGETING Instructor's Manual Problem Set Solutions can be found in the accompanying Excel files. Note that if you wish to see all of the formulas at once, you may use the CTRL+ Control plus grave accent) shortcut key to toggle them on or of. 1. Repeat the Supreme Shoe Company example from Chapter 12 in the text using MACRS instead of the straight line depreciation method. Create an operating cash flow statement for the new project to calculate the after-tax cash flows year- by-year Determine the payback period, discounted payback period, NPV, PI, IRR, and MIRR. a) b) cement Analvsis MACRS Old Machne New nheDierence Salvage Value Book Value Taxable Amt 22,000 5,000 0,000 81,000 2,000 (66,000) 650 22440 After-Tax Salvage 21,320 37,440 8 Original Saivage Value 9 Current Salvage Value 10 Current Book Value 11 Increase in Raw Materials 15 Marginal Tax Rate Cash Flow Statement Using MACRS 21 Change in Revenue 32,000)2000) 32000) 2000) 2,000) (4,000) (4000) (4,000) 4,000) (4,000) 26 Add Back Change in Depreciation 27 Operating Cash Flew After Tax 2Change in Non-Operating Cash Flow 62,680 29 Total Aftes-Tax Cash Flows Choose Depreciation Method ,000 4,0004,00 3,20013,200 3,00 13,20 13,200 36 Nea Machine: Straight-Line Chapter 13 Chapter 11 Chapter 12 Chapter 12 CHAPTER 12: CAPITAL BUDGETING Instructor's Manual Problem Set Solutions can be found in the accompanying Excel files. Note that if you wish to see all of the formulas at once, you may use the CTRL+ Control plus grave accent) shortcut key to toggle them on or of. 1. Repeat the Supreme Shoe Company example from Chapter 12 in the text using MACRS instead of the straight line depreciation method. Create an operating cash flow statement for the new project to calculate the after-tax cash flows year- by-year Determine the payback period, discounted payback period, NPV, PI, IRR, and MIRR. a) b) cement Analvsis MACRS Old Machne New nheDierence Salvage Value Book Value Taxable Amt 22,000 5,000 0,000 81,000 2,000 (66,000) 650 22440 After-Tax Salvage 21,320 37,440 8 Original Saivage Value 9 Current Salvage Value 10 Current Book Value 11 Increase in Raw Materials 15 Marginal Tax Rate Cash Flow Statement Using MACRS 21 Change in Revenue 32,000)2000) 32000) 2000) 2,000) (4,000) (4000) (4,000) 4,000) (4,000) 26 Add Back Change in Depreciation 27 Operating Cash Flew After Tax 2Change in Non-Operating Cash Flow 62,680 29 Total Aftes-Tax Cash Flows Choose Depreciation Method ,000 4,0004,00 3,20013,200 3,00 13,20 13,200 36 Nea Machine: Straight-Line Chapter 13 Chapter 11 Chapter 12 Chapter 12