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It's all one table. After-Tax Cash Flows Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Modern
It's all one table.
After-Tax Cash Flows Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Modern Systems, Inc., has incorporated into its net present value analyses during the past year. Unless otherwise noted, the items listed are unrelated to each other. All situations assume a 30% income tax rate and a 10% minimum desired rate of return. 1. Pre-tax savings of $5,000 in cash expenses will occur in each of the next three years. 2. A machine is purchased now for $82,000. 3. Special tools costing $51,000 will be depreciated $10,200, $20,400, and $20,400, respectively, on the tax return over a three-year life. 4. A patent purchased for $351,000 will be amortized on a straight-line basis over 15 years on the tax return. No salvage value is expected. 5. Pre-tax savings of $8,000 in cash expenses will occur in each of the next seven years. 6. Pre-tax savings of $7,500 in cash expenses will occur in the first, fourth, and seventh years from now. 7. The special tools described in aspect 3 will be sold after three years for $12,000 cash. 8. A truck with a tax book value of $7,500 after two years will be sold at that time for $4,600. a. Calculate and record in column A the related after-tax cash effect(s). b. Indicate in column B the timing of each cash flow shown in column A. Use O to indicate immediately and 1, 2, 3, 4, and so on for each year involved. The answer to investment aspect 1 is presented as an example. Use negative signs with answers that are cash outflows. Under Column B, select the appropriate year for the timing of each cash flow using the drop down menu. B Year(s) of Cash Flow A After-tax Investment Cash Flow Effect(s) Aspect Inflows/ (Outflows) 1 $ 3,500 3,500 3,500 0 1 2 3 2 N 3 0 0 - 0 4 0 > 0 0 > 0 0 . 0 > 0 > 0 0 0 0 0 0 0 5 0 0 0 0 0 0 0 6 0 0 0 7 0 8 0 Please answer all parts of theStep by Step Solution
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