Beckingham Beads Capital Budgeting Solution

Beckingham Beads Capital Budgeting Solution - $750,000...

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Information for Beckingham Beads Capitalized Amt:  $850,250  Straight Line Depreciation  $750,000  New Machine Price Salvage Value:  $75,000  1 20%  $155,050   $44,000  Shipping & Installation Net Amt Capitalized:  $775,250  2 20%  $155,050   $56,250  Sales Tax (7.5%) 3 20%  $155,050   $85,000  Sold Old Machine Old Machine Depreciation 4 20%  $155,050   $28,000  Initial NWC BV  $50,000  5 20%  $155,050   $550,000  Increased Revenue Years Remaining 2 Total:  $775,250   $148,000  Additional Expenses Yearly Depreciation:  $25,000   Sunk Costs  Sell Old Machine @ Time 0 Cannot Sell Old Machine @ Terminal Year  $25,000  Market Study $85,000 Sales Price (MV Today) $25,000 Sales Price  $18,000  Engineering Designs $50,000 Book Value $- Book Value $35,000 Capital Gain (Loss) $25,000 Capital Gain (Loss)  Tax Rate 32% $11,200 Taxes on Gain $8,000 Taxes on Gain  Cost of Capital 15% $73,800 Net Cash Flow $(17,000) Net Cash Flow  Sales Tax Rate  7.5% Operating Cash Flows 0 1 2 3 4 5 Total Increased Sales  $550,000   $550,000   $550,000   $550,000   $550,000  Less: Additional Expenses  $148,000   $148,000   $148,000 
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