A edwards manufacturing company emc sells the old

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Unformatted text preview: expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $130,000. The firm has a chance to sell its 4-yearold roaster for $35,000. The existing roaster originally cost $60,000 and was being depreciated using MACRS and a 7-year recovery period (see Table 3.2 on page 100). DuPree pays taxes at a rate of 40% on ordinary income and capital gains. a. What is the book value of the existing roaster? b. Calculate the after-tax proceeds of the sale of the existing roaster. c. Calculate the change in net working capital using the following figures: Anticipated Changes in Current Assets and Current Liabilities Accruals $20,000 Inventory 50,000 Accounts payable 40,000 Accounts receivable 70,000 Cash Notes payable 0 15,000 d. Calculate the initial investment associated with the proposed new roaster. LG5 8–15 Depreciation A firm is evaluating the acquisition of an asset that costs $64,000 and requires $4,000 in installation costs. If the firm depreciates the asset under MACRS, using a 5-year recovery period...
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This document was uploaded on 01/19/2014.

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