Lilian's Lanterns Capital Budgeting Solution

Lilian's Lanterns Capital Budgeting Solution - 'sLanterns...

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Information for Lilian's Lanterns Capitalized Amt:  $2,371,250  Straight Line Depreciation  $1,875,000  New Machine Price Salvage Value:  $125,000  1 20%  $449,250   $365,000  Shipping & Installation Net Amt Capitalized:  $2,246,250  2 20%  $449,250   $131,250  Sales Tax (7%) 3 20%  $449,250   $21,500  Sold Old Machine Old Machine Depreciation 4 20%  $449,250   $64,000  Initial NWC BV  $25,000  5 20%  $449,250   $2,225,550  Increased Revenue Years Remaining 3 Total:  $2,246,250   $775,550  Additional Expenses Yearly Depreciation:  $8,333   $125,000  Salvage Value  Sunk Costs  Sell Old Machine @ Time 0 Cannot Sell Old Machine @ Terminal Year  $5,000,000  Research & Development $21,500 Sales Price (MV Today) $1,875 Sales Price  $77,770  Market Study $25,000 Book Value $- Book Value  $82,800  Engineering Designs $(3,500) Capital Gain (Loss) $1,875 Capital Gain (Loss)  Tax Rate 40% $(1,400) Taxes on Gain (Loss) $750 Taxes on Gain (Loss)  Cost of Capital 18% $22,900 Net Cash Flow $(1,125) Net Cash Flow  Sales Tax Rate  7% Operating Cash Flows 0 1 2 3 4 5 Total Increased Sales  $2,225,550   $2,225,550   $2,225,550   $2,225,550   $2,225,550  Less: Additional Expenses  $775,550   $775,550 
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