Tremonton Toys Capital Budgeting Solution

Tremonton Toys Capital Budgeting Solution - $1,013,500...

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Information for Tremonton Toys Capitalized Amt:  $1,166,148  Straight Line Depreciation  $1,013,500  New Machine Price Salvage Value:  $80,000  1 20%  $217,230   $66,500  Shipping & Installation Net Amt Capitalized:  $1,086,148  2 20%  $217,230   $86,148  Sales Tax (8.5%) 3 20%  $217,230   $105,000  Sold Old Machine Old Machine Depreciation 4 20%  $217,230   $88,000  Initial NWC BV  $30,000  5 20%  $217,230   $1,125,000  Increased Revenue Years Remaining 3 Total:  $1,086,148   $398,000  Additional Expenses Yearly Depreciation:  $10,000   $80,000  Salvage Value  Sunk Costs  Sell Old Machine @ Time 0 Cannot Sell Old Machine @ Terminal Year  $78,850  Market Study $105,000 Sales Price (MV Today) $17,500 Sales Price  $58,000  Engineering Designs $30,000 Book Value $- Book Value $75,000 Capital Gain (Loss) $17,500 Capital Gain (Loss)  Tax Rate 34% $25,500 Taxes on Gain $5,950 Taxes on Gain  Cost of Capital 17% $79,500 Net Cash Flow $(11,550) Net Cash Flow  Sales Tax Rate  8.5% Operating Cash Flows 0 1 2 3 4 5 Total Increased Sales  $1,125,000   $1,125,000   $1,125,000   $1,125,000   $1,125,000  Less: Additional Expenses  $398,000   $398,000   $398,000 
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