Reference no: EM132441041
Problem: ABC, Inc. purchased an equipment at time=0 for $52,504. The shipping and installation costs were $6,270. The equipment is classified as a 5-year MACRS property. The investment in net working capital at time=0 was $7,732 which would be recouped at the end of the project. The project life is four years. At the end of the fourth year, the company will sell the equipment for $13,114. The annual cash flows are $43,345. What is the cash flow of the project in Year 4? That is, solve for CF4. Assume that the tax rate is 16%
The MACRS allowance percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
Note: In the last year of the project, the Total Cash Flow = Operating Cash Flow + Terminal Cash Flow
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