fmpp-4e-sp-11-2

fmpp-4e-sp-11-2 - PROBLEM 11-14 Venkman, Stantz, and...

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Unformatted text preview: PROBLEM 11-14 Venkman, Stantz, and Spenler Given: Original cost of old machine $20,000 Accumulated depreciation $12,000 Resale value of old machine $18,000 Tax rate 30% a. Book value of old machine $8,000 b. Taxable gain(loss) on sale of old machine $6,000 c. Tax on sale of old machine $2,400 d. Net cash inflow(outflow) from sale of old machine $15,600 e. Incremental cash flow at T-0: Initial Cost of new Equipment $40,000 Net cash received for old machine $15,600 Incremental cash flow at T-0 $55,600 f. Revised calculations assuming old equipment can be sold for $6,000 b. Taxable gain(loss) on sale of old machine $6,000 c. Tax on sale of old machine $2,400 d. Net cash inflow(outflow) from sale of old machine $3,600 e. Incremental cash flow at T-0: Initial Cost of new Equipment $40,000 Net cash received for old machine $3,600 Incremental cash flow at T-0 $36,400 Student instructions: This worksheet is for problem 11-14. Information necessary to solve the problem is the section marked "given." Below, in the section marked "calculations," enter formulas in the blanks whe complete the calculations needed for questions a through f. s listed below in ere indicated to PROBLEM 11-15 Mitch & Lydia Brenner's New Molding Machine Given: Initial Cost of new Equipment $20,000 Set-up fee $2,000 Additional current assets required $5,000 Expected increase in current liabilities $3,000 End of year: 1 2 3 4 New revenues $20,000 $20,000 $10,000 $10,000 Increase in operating expenses 20% of new revenues Tax rate 40% Discount rate 14% Year 1 2 3 4 MACRS depreciation percentages for three-year class 33.30% 44.50% 14.80% 7.40% life equipment Calculations: a. Incremental Cash Flows at T-0: Cost of New Equipment $20,000 Set-up fees $2,000 Net Cash Outflow at T-0 for equipment $22,000 Additional net working capital required $5,000 Total Net Cash Outflow at T-0 $27,000 b. Incremental cash flows in years 1 - 4: Year 1 2 3 4 New Revenues $20,000 $20,000 $10,000 $10,000...
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fmpp-4e-sp-11-2 - PROBLEM 11-14 Venkman, Stantz, and...

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