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I just need part B in this assignment -At the end of year 6 the savage value of the system is estimated to be 5.309
I just need part B in this assignment
-At the end of year 6 the savage value of the system is estimated to be 5.309 million
Amazon.com, Inc.: Capital Budgeting Analysis Amazon.com (ticker: AMZN) is considering installing a new and highly sophisticated computer system to help expand its business, which would cost $74 million. Delivery and installation would add another $1.3 million to the initial cost. The new computer system has a 5-year class life under MACRS. Because of the half-year convention, it will take six years for Amazon to fully depreciate the cost of the system (MACRS percentages: 20, 32, 19, 12, 11 and 6 percent), and at the end of Year 6 the salvage value of the system is estimated to be $5.XXX million, where XXX are the digits found in your KU email address. Additional data: > >> > If the new system is purchased, revenue is expected to increase over the present level by $103 million in each of the first three years, by $96 million in Year 4, and by $88 million in Years 5 and 6. (These improvements are incremental, not cumulative.) The increase in operating costs is projected at $71.5 million for each of the six years. Amazon's federal-plus-state income tax rate is 37.5 percent. The project's cost of capital is 8.5 percent. It is expected that installation of the new system would cause the following changes in working capital accounts (1) an increase in receivables of $26 million because of expanded services, (2) an increase in inventories of $5.5 million, and (3) an increase in accounts payable and accruals combined equal to $8 million. Using Excel, do the following: A. State the basic assumptions of the problem in an "assumption block. This means that you should display in the upper left-hand corner of the spreadsheets all the relevant quantitative information given above, whether it actually changes in the problem or not. 1. Follow the analysis provided in your Ch. 12 Power Points and Table 12.1 in the e-book. The main difference left-hand corner of the he ad sheet all the relevainor qualitative information verweh above is like the changes Amazon.com, Inc.: Capital Budgeting Analysis Amazon.com (ticker: AMZN) is considering installing a new and highly sophisticated computer system to help expand its business, which would cost $74 million. Delivery and installation would add another $1.3 million to the initial cost. The new computer system has a 5-year class life under MACRS. Because of the half-year convention, it will take six years for Amazon to fully depreciate the cost of the system (MACRS percentages: 20, 32, 19, 12, 11 and 6 percent), and at the end of Year 6 the salvage value of the system is estimated to be $5.XXX million, where XXX are the digits found in your KU email address. Additional data: > >> > If the new system is purchased, revenue is expected to increase over the present level by $103 million in each of the first three years, by $96 million in Year 4, and by $88 million in Years 5 and 6. (These improvements are incremental, not cumulative.) The increase in operating costs is projected at $71.5 million for each of the six years. Amazon's federal-plus-state income tax rate is 37.5 percent. The project's cost of capital is 8.5 percent. It is expected that installation of the new system would cause the following changes in working capital accounts (1) an increase in receivables of $26 million because of expanded services, (2) an increase in inventories of $5.5 million, and (3) an increase in accounts payable and accruals combined equal to $8 million. Using Excel, do the following: A. State the basic assumptions of the problem in an "assumption block. This means that you should display in the upper left-hand corner of the spreadsheets all the relevant quantitative information given above, whether it actually changes in the problem or not. 1. Follow the analysis provided in your Ch. 12 Power Points and Table 12.1 in the e-book. The main difference left-hand corner of the he ad sheet all the relevainor qualitative information verweh above is like the changesStep by Step Solution
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