Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Real Time Inc. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is

image text in transcribed

Real Time Inc. The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $50,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in spare parts inventory of $3,000. Accounts payable will also increase by $2,000 The computer would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $5,000 per year. Annual interest expense is $500 per year. The computer is expected to be used for 3 years and then be sold for $35,000. The firm's marginal tax rate is 20 percent, and the project's cost of capital is 12 percent. MACRS Depreciation Rates are: Year 1: Year 2: Year 3: Year 4: 33% 45% 15% 7% 6. Refer to Real Time Inc. What is the net investment required at t = 0?(2 points) 7. Refer to Real Time Inc. What is the operating cash flow in Year3? (2 points) 8. Refer to Real Time Inc. What is the total value of the terminal year non-operating cash flow at the end of Year 3?(2 points)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Auditing And Other Assurance Services

Authors: Ray Whittington, Kurt Pany

22nd Edition

126059808X, 978-1260598087

More Books

Students also viewed these Accounting questions

Question

Describe the metadata associated with the physical ERD.

Answered: 1 week ago