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project wk 7 f1515

# project wk 7 f1515 - year 3 Taken from the Depreciation...

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Wednesday, September 28, 2011 Answer to A, B, and C submitted by Vanessa Munoz FI515_Course Project_Vanessa_Munoz A.) Estimated Investment Requirements: Price \$-70,000 Modification -15,000 Change in net working capital -4,000 Total investment \$-89,000 B.) Operating cash Flow: Year 1 Year 2 Year 3 1. After tax-cost savings \$15,000 \$15,000 \$15,000 2. Depreciation 28,050 38,250 12,750 3. Depreciation tax savings 11,220 15,300 5,100 Operating cash flow (1+3) \$26,220 \$30,300 \$20,100 Formulas: 1.) 25,000(1-T) 25,000(1-.40) 25,000(.60) =15,000 2.) 85,000(.33)=28,050 85,000(.45)=38,250 85,000(.15)=12,750 Depreciation basis =85,000, MACRS percent allowed are .33 for year 1, .45 for year 2, .15 for

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Unformatted text preview: year 3. Taken from the Depreciation table in toolkit chapter 11, under APP. A 3.) Depreciation tax savings =T(Depreciation) T=tax percentage 28,050(.40)=11,220 38,250(.40)=15,300 12,750(.40)=5,10 C.) Termination Cash Flow Salvage value \$30,000 Tax on salvage value -9,620 Net working capital recovery +4,000 Termination cash flow \$24,380 *calculation of tax on salvage value Book value=Depreciation basis-Accumulated depreciation =\$85,000-79,050 (28,050+38,250+12,750) =\$5,950 Sale Price \$30,000 Less book value 5,950 Taxable income \$24,050 Tax at 40% x .40 \$9,620...
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project wk 7 f1515 - year 3 Taken from the Depreciation...

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