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Updated_Chapter_12_Assignment

# Updated_Chapter_12_Assignment - Given Building cost is...

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BUS 320 Chapter 12 Assignment Cash Flow Problem #1 Given: Building cost is \$50,000. Machine cost is \$14,500. Installation cost of machine is \$500. Investment in Net Working Capital is \$8,000. All costs above will be paid in 2003. Beginning in 2004, the machine is depreciated using MACRS: Year: 1 2 3 4 Rate: 33% 45% 15% 7% Beginning in 2004, the building is depreciated using MACRS: Year: 1 2 3 4 Rate: 1.3% 2.6% 2.6% 2.6% Beginning in 2004, annual revenues are expected to be \$40,000 and annual costs are \$24,000. The firm’s tax rate is 30% and their cost of capital is 9%. This investment is to be evaluated over a 5 year period (2003-2007). At the end of 5 years (in 2007), the machine will be sold for \$2,000 and the building will be sold for \$47,000. Calculate the after-tax cash flows for each year (2003-2007) and determine the NPV and IRR.

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Cash Flow Problem #2
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Unformatted text preview: Given: Building cost is \$60,000. Machine cost is \$9,400. Shipping cost for machine is \$600. Investment in Net Working Capital (NWC) is \$5,000. All costs above will be paid in 2003. Beginning in 2004, the machine will be depreciated using MACRS: Year: 1 2 3 4 Rate: 33% 45% 15% 7% Beginning in 2004, the building will be depreciated using MACRS: Year: 1 2 3 4 Rate: 1.0% 2.0% 2.0% 2.0% Beginning in 2004, annual revenues are expected to be \$30,000 and annual costs will be \$14,000. The firm’s tax rate is 30% and their cost of capital is 10%. This investment is to be evaluated over a 5 year period (2003 – 2007). At the end of 5 years, the machine will be sold for \$500 and the building will be sold for \$50,000. Calculate the after-tax cash flows for each year and determine the NPV, the IRR, and the payback....
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