You can purchase a pinball arcade for $80,000. You expect to own and operate this arcade...

Transcribed Image Text:

You can purchase a pinball arcade for $80,000. You expect to own and operate this arcade for 13 years. At the end of years, along with the time-11 cash flow from operating the arcade, the project will also provide a terminal cash flow. Use the following information to calculate/determine the terminal cash flow. 1. As per GAAP [Generally Accepted Accounting Principles] rules, any pinball arcade is presumed to have a 20-year depreciable life. In constructing a straight-line depreciation schedule, build the schedule so as to depreciate this arcade's value down to a net book value of $0 in 20 years. 2. You forecast that, 13 years from now (i.e., right after operating the arcade in year 13), you could sell the arcade to another party for $58,000. 3. You will recall from this week's Live Session that Gain on Sale of Asset will hit your income statement, creating a Tax Expense. The appropriate tax rate for calculating the Tax Expense is 20.00%. Complete the following statements/calculations: a. The arcade's Net Book Value at t = 13 will be: $ [Round your answer to the nearest dollar.] b. The Gain on Sale of Asset at t = 13 (terminal) will be $ [Round your answer to the nearest dollar.] c. The Tax Expense created by the Gain at t = 13 (terminal) will be $ d. The terminal Cash Flow will thus be $. [Again, round to the nearest dollar.] [Round your answer to the nearest dollar.] You can purchase a pinball arcade for $80,000. You expect to own and operate this arcade for 13 years. At the end of years, along with the time-11 cash flow from operating the arcade, the project will also provide a terminal cash flow. Use the following information to calculate/determine the terminal cash flow. 1. As per GAAP [Generally Accepted Accounting Principles] rules, any pinball arcade is presumed to have a 20-year depreciable life. In constructing a straight-line depreciation schedule, build the schedule so as to depreciate this arcade's value down to a net book value of $0 in 20 years. 2. You forecast that, 13 years from now (i.e., right after operating the arcade in year 13), you could sell the arcade to another party for $58,000. 3. You will recall from this week's Live Session that Gain on Sale of Asset will hit your income statement, creating a Tax Expense. The appropriate tax rate for calculating the Tax Expense is 20.00%. Complete the following statements/calculations: a. The arcade's Net Book Value at t = 13 will be: $ [Round your answer to the nearest dollar.] b. The Gain on Sale of Asset at t = 13 (terminal) will be $ [Round your answer to the nearest dollar.] c. The Tax Expense created by the Gain at t = 13 (terminal) will be $ d. The terminal Cash Flow will thus be $. [Again, round to the nearest dollar.] [Round your answer to the nearest dollar.]

Answer rating: 100% (QA)

To calculate the terminal cash flow we need to determine the net book value at t 13 the gain on the ... View the full answer