FIN-504 MODULE 4 HW

FIN-504 MODULE 4 HW - A) 1) PRESS A + Cost of asset A...

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1) PRESS A Cost of asset A $830,000 + Installation costs + $40,000 Installed cost of asset A = $870,000 Change in net working capital $420,000 - Tax on sale of old asset (40%) - $168,000 After-tax proceeds from sale of old assets = $252,000 Installed Cost of asset A $870,000 - After-tax proceeds from sale of old assets - $252,000 Initial Investment for Press A = $618,000 PRESS B Cost of asset B $640,000 + Installation Costs + $20,000 Installed Cost of asset B = $660,000 Change in net working capital $330,000 - Tax on sale of old asset (40%) - $132,000 After-tax proceeds from sale of old assets = $198,000 Installed cost of asset B $660,000 - After-tax proveeds from sale of old assets - $198,000 Initial investment for asset B = $462,000 2) OLD PRESS Depreciation of Old Press Under MACRS using 5-Year Recovery Plan Year Installed Cost x Depreciation Percentages = 1 $400,000 x 20% = $80,000 2 $400,000 x 32% = $128,000 3 $400,000 x 19% = $76,000 4 $400,000 x 12% = $48,000 5 $400,000 x 12% = $48,000 6 $400,000 x 5% = $20,000 $400,000 Year 1 Year 2 Year 3 Earnings before depreciation, interest and taxes $120,000 $120,000 $120,000
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This note was uploaded on 07/06/2011 for the course FIN 504 taught by Professor Professorwhite during the Spring '11 term at Grand Canyon.

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FIN-504 MODULE 4 HW - A) 1) PRESS A + Cost of asset A...

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