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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:
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.
- Fall '13