= Homework: Homework 2 > IT. www.viu, VE V PRIL O Points: 0 of 38 Save Part 2 of 25 Integrative: Determining net cash flows Atlantic Drydock is replacing an existing hoist and is considering of two newer, more efficient pieces of equipment. The existing hoist is 3 years old, cost $31,700, and is being depreciated under MACRS using a 5-year recovery period. Although the existing hoist has only 3 years (years 4, 5, and 6) of depreciation remaining under MACRS, it has a remaining usable life of 5 years. Hoist A, one of the two possible replacement hoists, costs $40,900 to purchase and $7,600 to install. It has a 5-year usable life and will be depreciated under MACRS using a 5-year recovery period. Hoist B costs $53,600 to purchase and $5,500 to install. It also has a 5-year usable life and will be depreciated under MACRS using a 5-year recovery period. Increased investments in net working capital will accompany the decision to acquire hoist A or hoist B. Purchase of hoist A would result in a $4,500 increase in net working capital; hoist B would result in a $6,400 increase in net working capital. The projected earnings before depreciation, interest, and taxes with each alternative hoist and the existing hoist are given in the following table The existing hoist can currently be sold for $18,200 and will not incur any removal or cleanup costs. At the end of 5 years, the existing hoist can be sold to net $1.000 before taxes Hoists A and B can be sold to net S11 700 and $20,700 before taxes, respectively, at the end of the 5-year period (see MACRS table B). The firm is subject to a 21% tax rate. D a. Calculate the initial cash flow associated with each alternative. Data table b. Calculate the periodic cash flows associated with each alternative. (Note: sure to consider the depreciation in year 6.) c. Calculate the terminal cash flow at the end of year 5 associated with each alternative. d. Depict on a time line the net cash flows associated with each alternative. he icon here e in order to copy the contents of the data table below into Initial Cash Flow heet.) Data table Cost of new asset $ Earnings before Installation costs $ depreciation, interest, and taxes With hoist A With hoist B With existing hoist Installed cost of new asset $ Rounded Depreciation Percentages by Recovery Year Using MACRS for $20,000 $21,800 $13,200 First Four Property Classes 20,000 24,000 13,200 Percentage by recovery year 20,000 25,800 13,200 Proceeds from sale of old asset $ Recovery year 3 years 5 years 7 years 20.000 25,800 13,200 $ 1 Tax on sale of old asset 33% 20% 14% 20.000 25,800 13,200 2 45% 32% 25% Total proceeds, sale of old asset $ 15% 19% 18% 7% 12% 12% 12% 9% 6 5% 9% 7 9% Help me solve this View an exal 8 4% 9 10 11 ear 3 4 5 banca i vrlina nital = Homework: Homework 2 > IT. www.viu, VE V PRIL O Points: 0 of 38 Save Part 2 of 25 Integrative: Determining net cash flows Atlantic Drydock is replacing an existing hoist and is considering of two newer, more efficient pieces of equipment. The existing hoist is 3 years old, cost $31,700, and is being depreciated under MACRS using a 5-year recovery period. Although the existing hoist has only 3 years (years 4, 5, and 6) of depreciation remaining under MACRS, it has a remaining usable life of 5 years. Hoist A, one of the two possible replacement hoists, costs $40,900 to purchase and $7,600 to install. It has a 5-year usable life and will be depreciated under MACRS using a 5-year recovery period. Hoist B costs $53,600 to purchase and $5,500 to install. It also has a 5-year usable life and will be depreciated under MACRS using a 5-year recovery period. Increased investments in net working capital will accompany the decision to acquire hoist A or hoist B. Purchase of hoist A would result in a $4,500 increase in net working capital; hoist B would result in a $6,400 increase in net working capital. The projected earnings before depreciation, interest, and taxes with each alternative hoist and the existing hoist are given in the following table The existing hoist can currently be sold for $18,200 and will not incur any removal or cleanup costs. At the end of 5 years, the existing hoist can be sold to net $1.000 before taxes Hoists A and B can be sold to net S11 700 and $20,700 before taxes, respectively, at the end of the 5-year period (see MACRS table B). The firm is subject to a 21% tax rate. D a. Calculate the initial cash flow associated with each alternative. Data table b. Calculate the periodic cash flows associated with each alternative. (Note: sure to consider the depreciation in year 6.) c. Calculate the terminal cash flow at the end of year 5 associated with each alternative. d. Depict on a time line the net cash flows associated with each alternative. he icon here e in order to copy the contents of the data table below into Initial Cash Flow heet.) Data table Cost of new asset $ Earnings before Installation costs $ depreciation, interest, and taxes With hoist A With hoist B With existing hoist Installed cost of new asset $ Rounded Depreciation Percentages by Recovery Year Using MACRS for $20,000 $21,800 $13,200 First Four Property Classes 20,000 24,000 13,200 Percentage by recovery year 20,000 25,800 13,200 Proceeds from sale of old asset $ Recovery year 3 years 5 years 7 years 20.000 25,800 13,200 $ 1 Tax on sale of old asset 33% 20% 14% 20.000 25,800 13,200 2 45% 32% 25% Total proceeds, sale of old asset $ 15% 19% 18% 7% 12% 12% 12% 9% 6 5% 9% 7 9% Help me solve this View an exal 8 4% 9 10 11 ear 3 4 5 banca i vrlina nital