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Your company is considering investing in a new asset that costs $185,500. The old asset, which has a book value of $100,000, can be sold
Your company is considering investing in a new asset that costs $185,500. The old asset, which has a book value of $100,000, can be sold for $100,000. The purchase price of the old asset was $450,000. The new asset will allow you to keep less inventory on hand. You believe that you will be able to reduce your inventory by $6,000. What is the net cash outlay for this asset? I
Income tax rate = 30%
Capital gains tax rate = 15%
(Please use Excel)
| PROBLEM 1 | ||
| Inputs | ||
| Cost of New Asset | ||
| Installation Costs | ||
| Old Asset | ||
| Book Value | ||
| Proceeds on Sale | ||
| Initial Purchase Price | ||
| Capital Gains Tax Rate | ||
| Ordinary Income Tax Rate | ||
| Decrease in Working Capital | ||
| Outputs | ||
| Cash Distribution Table | Distribution | Tax Effects |
| Book Value | ||
| Capital Gain | ||
| Capital Loss | ||
| Recaptured Depreciation | ||
| Proceeds on Sale | ||
| Cost of New Asset | ||
| Installation Costs | ||
| Proceeds on Sale,Old Asset | ||
| Taxes on Proceeds on Sale | ||
| Decrease in Working Capital | ||
| Net Cash Outlay |
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