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Fabletop Ranches Inc. is considering the purchase of a new helicopter for $375,000. The firm's old helicopter has a book value of $50,000 but can
Fabletop Ranches Inc. is considering the purchase of a new helicopter for $375,000. The firm's old helicopter has a book value of $50,000 but can be sold today for $20,000. The new helicopter will be subject to a CCA rate of 25 percent. It is expected to save $62,000 per year for 7 years through reduced fuel and maintenance expenses. The company will need to invest $12,000 in spare parts inventory (working capital) when they purchase the helicopter. At the end of the 7 years the company believes it can sell the helicopter for $40,000. Tabletop Ranches has a 12 percent cost of capital and a 30 percent tax rate. Required: 25 a. Complete the following table by entering the present value, after-tax, of each of the following cash flows. Enter all cash flows net of tax, where applicable. Round all cash flow numbers to zero decimal places, Enter cash outflows as negative numbers. $ -375,000 Description Initial Investment Trade In Expense Savings Salvage CCA Tax Shield Working Capital (net of recovery) Net Present Value
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