A firm is considering a $80,200 purchase of equipment. The equipment would be depreciated to zero...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A firm is considering a $80,200 purchase of equipment. The equipment would be depreciated to zero using the 5-year MACRS depreciation schedule. MACRS table: Year 3-year class 1 33.33% 2 44.45% 14.81% 7.41% 19 3 4 5 6 7 8 5-year class 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 7-year class 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% Part A: How much would depreciation be in year 3? Part B: What would the equipment's book value be after three years? Part C: Suppose that at the end of three years the equipment is sold for $80,200. What would the salvage cash flow (i.e., the net cash flow after taxes) be at that time? Please assume that the firm has a tax rate of 35%. A firm is considering a $80,200 purchase of equipment. The equipment would be depreciated to zero using the 5-year MACRS depreciation schedule. MACRS table: Year 3-year class 1 33.33% 2 44.45% 14.81% 7.41% 19 3 4 5 6 7 8 5-year class 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 7-year class 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% Part A: How much would depreciation be in year 3? Part B: What would the equipment's book value be after three years? Part C: Suppose that at the end of three years the equipment is sold for $80,200. What would the salvage cash flow (i.e., the net cash flow after taxes) be at that time? Please assume that the firm has a tax rate of 35%.
Expert Answer:
Answer rating: 100% (QA)
Part A The depreciation expense in year 37 would be calculated as follows Depreciation Expense Book Value x Depreciation Rate Using the 5year MACRS depreciation schedule the depreciation rate for year ... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
Students also viewed these finance questions
-
A contract engineer at DuPont Corp. studied the rate at which a spilled volatile liquid will spread across a surface (Chemical Engineering Progress, Jan. 2005). Assume 50 gallons of methanol spills...
-
Determine the atmospheric pressure at a location where the barometric reading is 740 mm Hg and the gravitational acceleration is g = 9.81 m/s2. Assume the temperature of mercury to be 10C, at which...
-
2. Two objects , B1 (T 40C) and B2 (T= 18C, experienced entropy changes of 6.4 x 10 J/K and 2.8 x 10 J/K, respectively, after they had been placed in direct contact with each other. Bi lost 2.0 x 10'...
-
MVP Company issued a callable bond. The bond is a 7% semiannual coupon bond currently priced at 102 that has a remaining time to maturity of seven years. The bond is callable beginning the end of...
-
Consider the periodic function Which represents the positive portions of a sine function (Such a function represents, for example, the output of a half-wave rectifying circuit)? Find the Fourier...
-
Kelly Corporation received an advanced payment of \(\$ 30,000\) in 2018 from Rufus Company for consulting services. Kelly performed half of the consulting in 2018 and the remainder in 2019. Kelly...
-
Eaton Company issued \(\$ 600,000\) of eight percent, 20 -year bonds at 106 on January 1, 2013. Interest is payable semiannually on July 1 and January 1. Through January 1, 2019, Eaton amortized \(\$...
-
Bird-Bath, Inc., experienced four situations for its supplies. Compute the amounts that have been left blank for each situation. For situations 1 and 2, journalize the needed transaction. Consider...
-
Howell Petroleum, Incorporated, is trying to evaluate a generation project with the following cash flows: Cash Flow Year 0 -$ 35,500,000 1 2 52,500,000 -10,500,000 a. If the company requires a return...
-
According to the assigned case study, Lawn King must develop an S&OP plan that considers the costs of inventory, overtime, hiring, and layoff (beware of stock outs). If the plan results in back...
-
Composer of operas, ballets, and symphonies among other dramas whose work was largely sustainable by the financial contributions of a long time sponsor/benefactor is
-
Why do you think the experiment in teamwork at Cape Industries was unsuccessful? give a long detailed explanation.
-
How does a relational database organize data, and how does it differ from an object-oriented database? What are the principles of a database management system?
-
Why is financial auditing necessary within a casino operation? What are some of the ways a casino keep accurate records of its gaming revenue in order to be prepared when financial audits are...
-
Create a vision & mission statement for any company of your choice . Explain/describe how the mission will be essential to the companys success. Research the subject matter and add additional...
-
Why is management development management development one of the most common HRD activities found in organizations today? Do you think in the future it will become even more important or less? Support...
-
In Marigold Company, the Cutting Department had beginning work in process Inventory of 4000 units, completed and transferred out 26000 units, and fiad an ending work in process inventory of 3500...
-
Draw the appropriate control flow graph of the given pseudocode.Make sure to only use one number for blocks of code which are all sequential and when the first line is executed, all of those lines...
-
Murdock Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firms financial analysts have developed pessimistic, most likely, and optimistic...
-
Allen Products, Inc., wants to do a scenario analysis for the coming year. The pessimistic prediction for sales is $900,000; the most likely amount of sales is $1,125,000; and the optimistic...
-
Neil Corporation has three projects under consideration. The cash flows for each project are shown in the following table. The firm has a 16% cost of capital. a. Calculate each project's payback...
-
The stockholders' equity of Elsworth Corporation at January 1 is shown below: The following transactions, among others, occurred during the year: Apr. 1 Declared a 100 percent stock dividend on all...
-
The stockholders' equity of Zhou Corporation at January 1 follows: The following transactions, among others, occurred during the year: Jan. 1 Announced a 4-for-1 common stock split, reducing the par...
-
Using your analysis from P11-8B, prepare the Stockholders' Equity section of the Zhou Corporation's balance sheet. Problem P11-8B The stockholders' equity of Zhou Corporation at January 1 follows:...
Study smarter with the SolutionInn App