Question
Stroms Drive-In is considering replacing its old projector with a new one. The old projector was being depreciated using MACRS (5 year class). Original installed
Stroms Drive-In is considering replacing its old projector with a new one. The old projector was being depreciated using MACRS (5 year class). Original installed cost was $10,000 four years ago and it can now be sold for $2,000. The new projector will cost $18,000 and will be depreciated using MACRS (5 year class). Reduced expenses of $5,000 per year will result because of decreased labor cost to run the projector. The firm is in the 21% tax bracket.
What is the operating cash flow for year 2?
Use
Table 13.1 MACRS Depreciation Schedule
| Year | Class | |||
| 3 years | 5 years | 7 years | 10 years | |
| 1 | 41.67% | 25.00% | 17.85% | 12.50% |
| 2 | 38.89% | 30.00% | 23.47% | 17.50% |
| 3 | 14.14% | 18.00% | 16.76% | 14.00% |
| 4 | 5.30% | 11.37% | 11.97% | 11.20% |
| 5 | 11.37% | 8.87% | 8.96% | |
| 6 | 4.26% | 8.87% | 7.17% | |
| 7 | 8.87% | 6.55% | ||
| 8 | 3.34% | 6.55% | ||
| 9 | 6.56% | |||
| 10 | 6.55% | |||
| 11 | 2.46% | |||
| Total | 100.00% | 100.00% | 100.00% | 100.00% |
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Intermediate Accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
10th edition
978-1260481952
