Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Equipment previously used in Oak's business with a useful life of five years for tax purposes was sold on September 20 Year 7, for net

Equipment previously used in Oak's business with a useful life of five years for tax purposes was sold on September 20 Year 7, for net proceeds of $45,000. The equipment was originally purchased for $.


Some New Equipment Under Consideration Will Cost $2,400,000 And Will Be Used For 7 Years. Net Working Capital Will Experience A One Time Increase Of $521,000 If The Equipment Is Purchased. 


 Is Expected To Generate Annual Revenues Of $2,200,000 And Annual CostsUse the following information to answer the next three questions: Some new equipment under consideration will cost $2,400,000 and will be used for 7 years. Net working capital will experience a one time increase of $521,000 if the equipment is purchased. The equipment is expected to generate annual revenues of $2,200,000 and annual costs of $704,000. The project falls under the five-year MACRs class for tax purposes, the tax rate is 36 percent, and the cost of capital is 15 percent. The project's fixed assets can be sold for $576,000 at the end of the project's life. -What is the book value of the equipment at the end of the project's life? Round your answer to the nearest whole dollar. -What are the taxes on the sale of the equipment at the end of the project's life? Be sure to indicate clearly if taxes are owed or if there is a tax benefit. Round your answer to the nearest whole dollar. -What is the net cash flow for the last year of the project? Round your answer to the nearest whole dollar.

MACRS Depreciation Allowances
Property Class
Year3-Year5-Year7-Year
133.33%20.00%14.29%
244.4532.0024.49
314.8119.2017.49
47.4111.5212.49
5
11.528.93
6
5.768.92
7

8.93
8

4.46

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Book Value of Equipment at End of Project At the end of the project s life the book value of the equ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting Tools for Business Decision Making

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

7th Canadian edition

1119368456, 978-1119211587, 1119211581, 978-1119320623, 978-1119368458

More Books

Students also viewed these Accounting questions