Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are evaluating a potential investment in equipment. The equipment's basic price is $184,000, and shipping costs will be $3,700. It will cost another $23,900

image text in transcribed
image text in transcribed
image text in transcribed
You are evaluating a potential investment in equipment. The equipment's basic price is $184,000, and shipping costs will be $3,700. It will cost another $23,900 to modify it for special use by your firm, and an additional $12,900 to install it. The equipment falls in the MACRS 3 -year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 29,200 at the end of three years. The equipment is expected to generate revenues of $168,000 per year with annual operating costs of $82,000. The firm's marginal tax rate is 45.0%. What is the initial outlay for the project? You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks will be $233,000. The trucks fall in the MACRS 5 -year class that allows depreciation of 20% the first year, 32% the second year, 19% the third year, 12% the fourth year, 11% the fifth year, and 6% the sixth year. You expect to sell the trucks for 32,600 at the end of five years. The expected revenue associated with the trucks is $171,000 per year with annual operating costs of $79,000. The firm's marginal tax rate is 45.0%. What is the after-tax operating cash flow for year 5 ? ou are evaluating a potential investment in equipment. The equipment's basic price s$126,000, and shipping costs will be $3,800. It will cost another $18,900 to modify it for special use by your firm, and an additional $6,300 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 23,300 at the end of three years. The equipment is expected to generate revenues of $115,000 per year with annual operating costs of $61,000. The firm's marginal tax rate is 30.0%. What is the value of the after-tax cash flow associated with the sale of the equipment

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

Inside And Outside Liquidity

Authors: Bengt Holmstroem, Jean Tirole

1st Edition

0262518538, 9780262518536

More Books

Students also viewed these Finance questions