Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Help please do all Paradigm Metals, Inc. is evaluating a new 3 - D printer to support a new production program. The 3 - D

Help please do all
Paradigm Metals, Inc. is evaluating a new 3-D printer to support a new production program. The
3-D printer costs $95,000 and requires another $15,000 in setup and calibration. The firm will
finance 40% of the cost basis with equal payments made on the loan at 10% over 5 years. The 3-D
printer has an expected service life of 5 years but falls into the MACRS 7-year class for depreciation
purposes. After 5 years the salvage value is estimated at $17,000. With the 3-D printer online
annual revenues are estimated at $60,000. Annual expenses are estimated at $6,000 in labor,
$2,000 in material, and $2,000 in overhead. The CFO has authorized $25,000 in working capital
which is to be recovered at the end of the 5 th year. The CFO has set the MARR at 17%(after tax)
and the tax rate for the firm is set at 40%. Find the following:
a. Draw the before tax cash flow
b. Find the book value at the end of year 5, the capital gain or loss from the sale of the asset,
and the associated taxes (from gain) or tax advantage (from loss) for the cash flow in year 5.
A partial set of the depreciations have been
calculated in the table shown.
c. Taxes have been calculated and are identified below for years 1,2, and 3. Calculate the
taxes for years 4 and 5(a partial loan amortization is provided to assist with yearly interest
deductions). Use the
depreciations from part (b).
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Options Futures And Other Derivatives

Authors: John C. Hull

8th Edition

0132164949, 9780132164948

More Books

Students also viewed these Finance questions