Calculating initial investment DuPree Coffee Roasters Inc. wishes to expand and modernize its facilitics. The installed...

 

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Calculating initial investment DuPree Coffee Roasters Inc. wishes to expand and modernize its facilitics. The installed cost of a proposed computer-controlled auto- matic-feed roaster will be $130,000. The firm has a chance to sell its 4-year-old 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 4.2 for the applicable depreciation percentages.) DuPree is subject to a 21% tax rate. 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 figures in the following table. Anticipated Changes in Current Assets and Current Liabilities Expense accruals Inventory Accounts payable Accounts receivable Cash Notes payable -$20,000 + 50,000 + 40,000 + 70,000 0 + 15,000 Calculate the initial investment associated with the new roaster. Calculating initial investment DuPree Coffee Roasters Inc. wishes to expand and modernize its facilitics. The installed cost of a proposed computer-controlled auto- matic-feed roaster will be $130,000. The firm has a chance to sell its 4-year-old 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 4.2 for the applicable depreciation percentages.) DuPree is subject to a 21% tax rate. 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 figures in the following table. Anticipated Changes in Current Assets and Current Liabilities Expense accruals Inventory Accounts payable Accounts receivable Cash Notes payable -$20,000 + 50,000 + 40,000 + 70,000 0 + 15,000 Calculate the initial investment associated with the new roaster.

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