Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Wizard Productions Limited (WPL) is considering replacing its old fully depreciated forklift with a new model costing $850,000. The consultants estimate the old forklift will

Wizard Productions Limited (WPL) is considering replacing its old fully depreciated forklift with a new model costing $850,000. The consultants estimate the old forklift will be able to be sold for a scrap value of $107,000 and the new forklift will have a life of 5 years. Due to the efficiency of the new forklift it will increase the amount of space WPL has for inventory and increase stock by $620,000 which will result in increased sales of $170,000 as well as increased administration expenses of $250,000. The new forklift will reduce its returned sales and rejected products; this will result in savings of $64,000 a year. Due to the efficiency of the forklift wage costs for storage and handling/packing will fall by $176,000 a year. Depreciation allowance for tax is 9 years straight line for the forklift. What is the yearly incremental operating cash flow to the nearest dollar for this project given the company tax rate is 30%?

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

Finance Theory And Practice

Authors: Anne Marie Ward

2nd Edition

1907214259, 978-1907214257

More Books

Students also viewed these Finance questions