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cfc session 7 ch8

# Bw can sell the current machine for the new machine

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Unformatted text preview: ing. BW can sell the current machine for \$6,000. BW can sell the current machine for The new machine will not increase revenues (remain at \$110,000) but it decreases operating expenses by \$10,000 per year (old = \$80,000). NWC will rise to \$10,000 from \$5,000 (old). 27 Certified Financial Controller CFC Initial Cash Outflow a) b) c) d) e) f) 28 + + – – = \$50,000 20,000 5,000 6,000 (sale of “old” asset) savings from 2,400 <---- (tax savings from loss on sale of \$66,600 66, “old” asset) Certified Financial Controller CFC 14 Calculation of the Change in Depreciation Year 1 \$23,331 a) Year 2 \$31,115 Year 3 \$10,367 Year 4 \$ 5,187 b) – 6,000 6,000 0 0 c) = \$17,331 17, \$25,115 25, \$10,367 10, \$ 5,187 a) Represent the depreciation on the “new” project. b) Represent the remaining depreciation on the “old” project. c) Net change in tax depreciation charges. change 29 Certified Financial Controller CFC Incremental Cash Flows Year 1 \$10,000 a) Year 2 \$10,000 Year 3 \$10,000 Year 4 \$10,000 17, 17,331 25,115 25, 10,367 10, 5,187 5, b) – c) = d) – –2,932 –6,046 e) = \$ –4,399 \$ –9,069 f) + 17, 17,331 25,115 25, 10,367 10, 5,187 5, g) = \$12,932 12, \$16,046 16, \$10,147 10, \$ 8,075 30 \$ –7,331 –\$15,115 \$ Certified Financial Controller CFC 15 \$ 4,813 –147 \$ –367 1,925 –220 \$ 2,888 TerminalTerminal-Year Incremental Cash Flows a) \$ 8,075 The incremental...
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