red nunbers are wrong

Damon Corporation, a sports equipment manufacturer, has a machine currently in use that was originally purchased 3 years ago for $125,000. The firm depreciates the machine under MACRS using a 5-year recovery period. Once removal and cleanup costs are taken into consideration, the expected net selling price for the present machine will be $70,000 Damon can buy a new machine fora net price of $170,000 (including installation costs of $15,000). The proposed machine will be depreciated under MACRS using a 5-year recovery period. If the firm acquires the new machine its working capital needs will change: Accounts receivable will increase $15,000, Inventory will increase $19,000, and accounts payable will increase $16,000, Earnings before depreciation, Interest, and taxes (EBDIT) for the present machine are expected to be $95,000 for each of the successive 5 years. For the proposed machine, the expected EBDIT for each of the next 5 years are $105,000, $110,000, $120,000, $120,000, and $120,000, respectively. The corporate tax rate (T) for the firm is 40%, (Table 4.2 on page 120 contains the applicable MACRS depreciation percentages.) Damon expects to be able to liquidate the proposed machine at the end of its 5-year usable life for $24,000 (after paying removal and cleanup costs). The present machine is expected to net $8,000 upon liquidation at the end of same period. Damon expects to recover its net working capital investment upon termination of the project. The firm is subject to a tax rate of 30% 1 2 3 $ 5 5 TO DO FOR PART 3: A. Complete the spreadsheet to calculate the initial Investment for the project. Corporation Calculation of the Initial Investment S 155,000 15.000 170.000 Installed cost of proposed machine Cost of proposed machine plus: Installation costs Total installed cost-proposed (depreciable value) After-tax proceeds from sale of present machine Proceeds from sale of present machine less: Tax on sale of present machine Total after-tax proceeds - present 5Change in net working Capital 70,000 10125 $ 59 875 $ 18,000 7 Initial investment Cash Outflow 92 125 $ 125.000 S Tax on sale of old machine Cost of old machine 1 MACRS 20% from depr sched 3 32% year 3 19% Book Value Change in Working Capital Increase in receivables increase in inventory increase in payables Net working capital year 1 year 2 25,000 40,000 23,750 36,250 15,000 19.000 16 000 18.000 s Sale price of old machine S 70,000 s Gain on sale Tax rate Tax Expense 33,750 30% 10 125 $ indicates cells where you must enter the appropriate formula indicates cells where you must enter a given number (other cells have had numbers or formulas left in for you) 3