Cap Budget problem headings only

Cap Budget problem headings only - Step 1 Net Cash...

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Step 1: Net Cash Investment Cost of Asset (purchase price) + Any costs to get asset ready for use Capitalized Cost -A/T proceeds of sale of current mach (see below) Net Cash Investment Tax Rate 30% 30% A/T proceeds of sale of current mach: Book Value of current machine: $48,000 Capitalized Cost of current mach $100,000 -Accumulated Depreciation $52,000 Macrs 5yr: 20.0000% 32.0000% Book Value of current machine Selling Price scenario A Sell Price = BV A/T proceeds=Sell price Selling Price scenario B Sell Price < BV A/T proceeds =Sell price + (BV-Sell price)*T) Selling Price scenario C Sell Price > BV A/T proceeds =Sell price - (Sell-BV)*T) Step 2: ATCFs Actual life of new machine 7 years 0 1 Net Cash Investment (Step 1) $(155,600) Decrease costs $40,000 1st year;increasing 5% per year $40,000 -Taxes 30% ($12,000) A/T Savings $28,000 Tax Savings from Depreciation (cap cost * Macrs%*T) $13,140 -Lost depreciation from current machine ($5,760) (cap cost current * remain Macrs% *T) Net increase in Tax Savings from Depreciation $7,380 Overhaul in yr 4 of $6000 Expense (1-T) =A/T cost of overhaul Rebate of $500 in yr 1 Rev (1-T) =A/T receipt of rebate $350
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Salvage of $5000
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