Question

Fox Tool and Die would like to purchase special tools with a cost of $60,000 that qualify for the 3-year MACRS schedule and should result in annual operating cash flow savings of $25,000 for four years. At the end of 4 years, the tools will have no terminal value. The company’s marginal tax rate is 25% and the required discount rate is 9%.

REQUIRED
A. Calculate the present value of the incremental operating cash flows.
B. Calculate the present value of the depreciation tax shield.
C. Calculate the net present value.



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  • CreatedJanuary 26, 2015
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