Question
QUESTION 54 Calculating initial investment DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster
QUESTION 54 Calculating initial investment DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $130,000. The firm has a chance to sell its 3-year-old roaster for $35,000.
The existing roaster originally cost $59,600 and was being depreciated using MACRS and a 7-year recovery period (see the table
DuPree pays taxes at a rate of 40% on ordinary income and capital gains.
a. What is the book value of the existing roaster?
b. Calculate the after-tax proceeds of the sale of the existing roaster.
c. Calculate the change in net working capital using the following figures:
Anticipated Changes in Current Assets and Current Liabilities | |
Accruals | -20,500 |
Inventory | +49,900 |
Accounts Payable | +40,700 |
Accounts Receivable | +71,000 |
Cash | 0 |
Notes Payable | +15,600 |
d. Calculate the initial investment associated with the proposed new roaster. a. The remaining book value of the existing roaster is ______. (Round to the nearest dollar.) b. The after-tax proceeds of the sale of the existing roaster will be _____. (Round to the nearest dollar.) c. The change in net working capital will be ____________. (Round to the nearest dollar.) d. The initial investment associated with the proposed new roaster will be _______. (Round to the nearest dollar.) Rounded Depreciation Percentages by Recovery Year Using MACRS for
First Four Property Classes
Percentage by recovery year* | ||||
Recovery year | 3 years | 5 years | 7 years | 10 years |
1 | 33% | 20% | 14% | 10% |
2 | 45% | 32% | 25% | 18% |
3 | 15% | 19% | 18% | 14% |
4 | 7% | 12% | 12% | 12% |
5 | 12% | 9% | 9% | |
6 | 5% | 9% | 8% | |
7 | 9% | 7% | ||
8 | 4% | 6% | ||
9 | 6% | |||
10 | 6% | |||
11 | 4% | |||
Totals | 100% | 100% | 100% | 100% |
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