Rockylord Company must reploce some mochinery that has zero book value and a current market value of 51,800 , One possibility is to hochyest in new machinery costing 540,000 . This new machinecy would pioduce estimated annual protox cash operating savings of \$12.5C0. Assume the new machine will hatue a usefui,lifo of 4 years and depreciation of $10,000 each year for book and tax purposes it. Wil have no sotvoge value at the end of 4 years. The imvestment in this new machinery would requlie an additional 53,000 In Westment of net working capital. (Assume that when the old machine wos purchased, the incremental net woridng caplal requred at If Rociryford accepts this investreent proposal, the disposal of the oid machinely and the investment in the new one will occur on the time was 50 . December 3t of this yeat. The cash fows from the investment are expected to oceur ovor a four-year period. Rockyford is subject to a 40 s income tax rote for all ordinary income and capital gains and has a 10Wh waighted-average atter tax cost Rockyord of copital All operating and tox cash fows are assumed to occut at year-end. ff or Parts 2 and 3 , use the relevant table from Apoend C-Table. or Table 2) 1. What is the aftertax cosh flow arising from disposing of the old machinery? Required: 2. What is the present value of the aftertax cash flows for the next 4 years attributable to the cosh operating savings? 3. Whet is the present value of the tax-shield effect of depreciation expense for year 1 ? 4. Which one of the following is the proper treatment for the additonal $3.000 of net wocking capiat required in the ciurent year? of capital. Alt operating and tax csh fiows are assumed to oecur at yeat-end. FFor Parts 2 and 3, use the relevant table trom Anpendix C-Table1 or Tabie 2) 1. What is the after tax cash flow arising from disposing of the old machinery? Requlred: 2. What is the present value of the atter-tax cash flows for the noxt 4 years attributable to the cash operating savings? 3. What is the present value of the tax-shield effect of depreciation expense for year 1 ? 4. Which one of the following is the proper treatment for the additional $3,000 of net working copital required in the current year? Complete this question by entering your answers in the tabs below. What is the after-tix cash fow arising from elyposing of the old machinery? Complete this question by entering your answers in the tabs below. What is the pretent value of the after-tak cath nows for the neat 4 years atrritutable to the cash operating savinge? (thound your amwer to neareat wiole dolar amount? of cap tal. A operating and tax cash fiows are assumed to occur at year-enc, for Parts 2 and 3, wso the reieyant table from Anoonses C-Tables or Tablo 2 ? Requlred: 1. What is the after tox cast fiow ansing from disposing of the old machinecy? 2. What is the present whlue of the aftectax cash tiows for the nest 4 yeers attobutable to the cash ogerating savings? 3. What is the plesent value of the tan shleld eflect of depreciaton expense for year f ? 4. Which one of the following is the proper treatment for the additional 53.000 of net working capital requiced int the curtent year? Complete this question by entering your answers in the tabs below. Rockylord Company must reploce some mochinery that has zero book value and a current market value of 51,800 , One possibility is to hochyest in new machinery costing 540,000 . This new machinecy would pioduce estimated annual protox cash operating savings of \$12.5C0. Assume the new machine will hatue a usefui,lifo of 4 years and depreciation of $10,000 each year for book and tax purposes it. Wil have no sotvoge value at the end of 4 years. The imvestment in this new machinery would requlie an additional 53,000 In Westment of net working capital. (Assume that when the old machine wos purchased, the incremental net woridng caplal requred at If Rociryford accepts this investreent proposal, the disposal of the oid machinely and the investment in the new one will occur on the time was 50 . December 3t of this yeat. The cash fows from the investment are expected to oceur ovor a four-year period. Rockyford is subject to a 40 s income tax rote for all ordinary income and capital gains and has a 10Wh waighted-average atter tax cost Rockyord of copital All operating and tox cash fows are assumed to occut at year-end. ff or Parts 2 and 3 , use the relevant table from Apoend C-Table. or Table 2) 1. What is the aftertax cosh flow arising from disposing of the old machinery? Required: 2. What is the present value of the aftertax cash flows for the next 4 years attributable to the cosh operating savings? 3. Whet is the present value of the tax-shield effect of depreciation expense for year 1 ? 4. Which one of the following is the proper treatment for the additonal $3.000 of net wocking capiat required in the ciurent year? of capital. Alt operating and tax csh fiows are assumed to oecur at yeat-end. FFor Parts 2 and 3, use the relevant table trom Anpendix C-Table1 or Tabie 2) 1. What is the after tax cash flow arising from disposing of the old machinery? Requlred: 2. What is the present value of the atter-tax cash flows for the noxt 4 years attributable to the cash operating savings? 3. What is the present value of the tax-shield effect of depreciation expense for year 1 ? 4. Which one of the following is the proper treatment for the additional $3,000 of net working copital required in the current year? Complete this question by entering your answers in the tabs below. What is the after-tix cash fow arising from elyposing of the old machinery? Complete this question by entering your answers in the tabs below. What is the pretent value of the after-tak cath nows for the neat 4 years atrritutable to the cash operating savinge? (thound your amwer to neareat wiole dolar amount? of cap tal. A operating and tax cash fiows are assumed to occur at year-enc, for Parts 2 and 3, wso the reieyant table from Anoonses C-Tables or Tablo 2 ? Requlred: 1. What is the after tox cast fiow ansing from disposing of the old machinecy? 2. What is the present whlue of the aftectax cash tiows for the nest 4 yeers attobutable to the cash ogerating savings? 3. What is the plesent value of the tan shleld eflect of depreciaton expense for year f ? 4. Which one of the following is the proper treatment for the additional 53.000 of net working capital requiced int the curtent year? Complete this question by entering your answers in the tabs below
