$1$ Spreadsheet Exercise: Chapter $11$

$2$

Damon Corporation, a sports equipment manufacturer, has a machine currently in use that was originally purchased three years ago for $$120,000.$ The firm depreciates the machine under MACRS using a five$-$year recovery period. Once removal and cleanup costs are taken into consideration, the expected net selling price for the present machine will be $$70,000.$ Damon can buy a new machine for a net price of $$160,000($including installation costs of $$15,000).$ The proposed machine will be depreciated under MACRS using a five$-$year recovery period. If the firm acquires the new machine its working capital needs will change: Accounts receivable will increase $$15,000,$ inventory will increase $$19,000,$ and accounts payable will increase $$16,000.$

$3$

Earnings before depreciation, interest, and taxes $($EBDIT$)$ for the present machine are expected to be $$95,000$ for each of the successive five years. For the proposed machine, the expected EBDIT for each of the next five years are $$105,000,$$$110,000,$$$120,000,$$$120,000,$ and $$120,000,$ respectively. The corporate tax rate $($