{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Updated_Chapter_12_Assignment_Solutions

# Updated_Chapter_12_Assignment_Solutions - BUS 320 Chapter...

This preview shows pages 1–3. Sign up to view the full content.

BUS 320 Chapter 12 Assignment Solutions Solution to Cash Flow Problem #1: Depreciation (Machine) Year Depr. % Depreciation Book Value 1 33% \$4,950 \$10,050 2 45% 6,750 3,300 3 15% 2,250 1,050 4 7% 1,050 0 Depreciation (Building) Year Depr. % Depreciation Book Value 1 1.3% \$650 \$49,350 2 2.6% 1,300 48,050 3 2.6% 1,300 46,750 4 2.6% 1,300 45,450 After-tax salvage value in 2007: Machine: Sale Price \$2,000 Book Value 0 Gain \$2,000 Taxes (30%) x .30 Tax Due \$600 After-tax Cash Flow = \$2,000 – 600 = \$1,400 Building: Sale Price \$47,000 Book Value 45,450 Gain \$1,550 Taxes (30%) x .30 Tax Due \$465 After-tax Cash Flow = \$47,000 – 465 = \$46,535 Total after-tax CF from salvage = \$1,400 + \$46,535 = \$47,935 2003 2004 2005 2006 2007 Costs -65,000 NWC - 8,000 Revenue \$40,000 \$40,000 \$40,000 \$40,000 -Costs 24,000 24,000 24,000 24,000 -Depreciation 5,600 8,050 3,550 2,350

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Taxable Income 10,400 7,950 12,450 13,650 -Tax @ 30% 3,120 2,385 3,735 4,095 Net Income 7,280 5,565 8,715 9,555 +Depreciation 5,600 8,050 3,550 2,350 +NWC Recovery 8,000 +Salvage 47,935 After-tax CF -73,000 12,880 13,615 12,265 67,840 NPV = \$7,806.38 IRR = 12.6% Solution to Cash Flow Problem #2: Depreciation (Machine) Year Depr. % Depreciation Book Value
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}