Question
It is Jan 1. The Rumpel Felt Company purchased a felt press last year at a cost of$ 15,500. The machine had an expected life
It is Jan 1. The Rumpel Felt Company purchased a felt press last year at a cost of$ 15,500. The machine had an expected life of 3 years at the time of purchase. The machine was depreciated using MACRS with a 5-year recovery period and currently has a book value of $ 12,400. The division manager reports that, for $ 13,000(including installation), a new felt press can be bought. The new felt press will expand sales, because the new fashion is for smoother felt. The old machine's current market value is $ 9,500. The new machine requires an increase in felt inventory of $ 3,500. Taxes are 35 %. What is the initial cash flow (on the date of replacement) if Rumpel replaces it today?
The initial cash flows are as follows:
- initial purchase price of the new asset ?
+ net salvage value of old asset ?
= net purchase price ?
+/- change in networking capital ?
= initial cash flow ?
Need to know all question marks above.
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