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A company wants to update their assets by buying some new machinery and selling some old equipment. The new machinery will cost $100,000 and will be depreciated using 3-year MACRS (33%, 45%, 15%, 7%). At the end of the third year, the machinery is expected to be sold for $10,000. The old equipment was bought three years ago for $60,000 and was being depreciated over four years using straight-line depreciation. It can be sold today for $10,000. If they do not buy the new machinery and replace the old equipment, then the old equipment is expected to be held for another three years at which point it will be worthless. Regardless of whether they buy the new machinery, Sales will be $500,000 for the next three years, but COGS will fall from 70% of Sales to 60% of Sales if they buy the new machinery. The tax rate is 40%. Balance Sheet Effects |-----------Depreciation Expenses------------| Today Year 1 Year 2 Year 3 End 1. Buy New Assets 2. Sell Old Assets Income Statement Effects Year 1 Year 2 Year 3 Net Sales -Net COGS -Net Depreciation = Net OEBT - Net Taxes = Net OEAT + Net Depreciation = Net Operating CF
1. What is the Net Investment (Initial Cash Outflow or CF0) for this project?
2. What is the Depreciation Expense in year one?
3. What is the Operating Cash Flow in year two for this project?
4. What is the after tax salvage value of selling the new machinery in three years?
Young Corpoartion stock currently sells for $40 per share. There are 1 million shares currently outstanding. The company announces plans to raise $5 million by offering shares to the public at a price of $40 per share. If the underwriting spread is ..
Jefferson Products, Inc., is considering purchasing a new automatic press brake, which costs $300,000 including installation and shipping. - Calculate the press brake's net present value.
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You’re trying to determine whether or not to expand your business by building a new manufacturing plant. The plant has an installation cost of $19.4 million, which will be depreciated straight-line to zero over its four-year life. If the plant has pr..
We are evaluating a project that costs $1106932, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 40774 units per year. Price per unit is $46, vari..
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Jonas desires fixed annual income of $85,000 beginning 20 years from now and lasting for 20 years. He plans to deplete the account. His annual required return is 9.5%. How much does he need to invest today to achieve his goal?
one area in which you are assisting is in the setup of business development in central and south america for navigation
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