Harriman, Other Engineering

HARRIMAN MANUFACTURING COMPANY


Harriman Manufacturing Company is evaluating the purchase of a new piece of equipment. The quoted price is $50,000, and it would cost Harriman another $ 10,000 for related capital costs such as transportation and equipment modification for special use. The total investment would fall into MACRS three year class with depreciation rates being applied to the full capitalized costs not excluding salvage at 33%, 45%, 15% and 7% in years 1-4, respectively. Harriman expects that the equipment would be sold in the fourth year, after three years, of use for a price of $20,000. During the three year period spare parts inventory would increase by $3,000 to maintain the equipment, but non-interest bearing accounts payable would increase by $1,000. Although the equipment is not expected to increase the firm''s revenue, it is expected to save it $20,000 in before tax labor operating costs. Harriman''s marginal tax rate is 40%.


a. Calculate the expected net cash outlay at the beginning of the first year.
b. Estimate the net operating cash flows in years 1, 2 and 3, and assume they occur at the end of each year.
c. What is the dollar value of the non-operating net cash terminal value (i.e., Salvage Value) in the fourth year?
d. If Harriman''s weighted average cost of capital is 10%, what are the investment''s Net Present Value, Internal Rate of Return and Simple Payback Period? Should the investment be made?
Posted Date: 6/7/2012 11:02:30 AM | Location : United States







Related Discussions:- Harriman, Assignment Help, Ask Question on Harriman, Get Answer, Expert's Help, Harriman Discussions

Write discussion on Harriman
Your posts are moderated
Related Questions
Continuous Casting : In essential, the process consists of pouring molten metal into a short vertical metal die or mould (at a controlled rate), which is open at both ends, coolin

find IDFT of the sequence X(k)={5,0,1,-j,0,1,0,1,j,0}

Q. Discuss the classifications of plastics.                                                      OR      Discuss the general properties and classification of plastics.

QUESTION 1 a) Describe any three properties of Mortars b) Each combination of coarse and fine aggregates has a specific water demand for a given mix fluidity or slump. What

How do we classify the principal planes as minor and major principal planes?

limitations of nernsts law

force and release constructs represents wich assignments

Integrated circuits: Integrated circuits, or IC's, have changed the entire electronics industry. Before IC's were developed, all electronic circuits consisted of individual (d

A charitable organization wants to design a special ATM machine to be used by needy people. The association supplies the needy person with a pin number to be able to use the ATM

5) Dupree Funds is considering the fees charged by two banks. First America charges a flat rate of $0.11 per payment and First Western requires a deposit of $500,000 (that does not