Question
Diltz Farms is considering investing in an automated egg-sorting system to increase production for international (web-based) sales of Diltz Farms' products. The new system will
Diltz Farms is considering investing in an automated egg-sorting system to increase production for international (web-based) sales of Diltz Farms' products. The new system will cost $3869 including installation. It will be fully depreciated in 5 yrs.(straight-line) to zero and generate $212 after-tax gain at the end of the projected period (year 6). The initial working capital will be $248 and will be $647 in year one and increase each year thereafter by 5 percent. Assume that at year 0, there is no change in working capital. Revenues generated from the egg-sorter are expected to be $800 in year one, and increase by five percent each year. Expenses are ten percent of revenues. Diltz Farms' cost of capital is 7.3%. Assume Tax rate as 35%
What is the:
Cost of the Asset
Life of the Asset in Years
Book Value of the Asset after 5 years
Depreciable Basis
Yearly Depreciation
After tax Salvage Value in year 6
Cost of capital
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