P12-1A

Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Anchor, 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 40% income tax rate and an 11% minimum desired rate of return. Pre-tax savings of $4,000 in cash expenses will occur in each of the next three years. A machine is purchased now for $37,000 cash. A long-haul tractor costing $27,000 will be depreciated $9,000. $12,000. $4, 050. $195, respectively, on the tax return over four years. Equipment costing $200,000 will be depreciated over five years on the tax return in the f0]U amounts: $25,000; $50,000: $50,000: S50.000; and $25,000. Pre lax savings of $8, 800 in cash expenses will occur in each of the next six years. Pre-tax savings of $7,000 in cash expenses will occur in the first, third, and fifth years from now. The tractor described in aspect 3 will be sold after four years for $5,000 cash. The equipment described in aspect 4 will be sold after four years for $20,000 cash. Required Set up an answer form with the two column headings as shown below. Answer each investment aspect separately. Prepare your calculations on a separate paper and key them to each item. The an investment aspect I is presented as an example