A proposed power-saving equipment has a purchase price of $580,000. The equipment will be used in...
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A proposed power-saving equipment has a purchase price of $580,000. The equipment will be used in a four-year project but is classified as five-year MACRS property for tax purposes. The equipment is expected to save $280,000 before taxes per year in energy costs, and it will have a salvage value of $60,000 at the end of the project. To decide on the feasibility of the investment, the managers have ordered a series of tests to determine whether the proposed equipment will realize the required costs savings or not for a total cost of $18,000. The required rate of return on the equipment is 14% and it is expected to increase working capital by $45,000 at the beginning of the project. The tax rate is 35 percent and the MACRS depreciation schedule is as follows: Year 1 2 3 5 6 MACRS 20.00% 32.00% 19.20 % 11.52% 11.52% 5.76% The terminal cash flow for this project is IR LIVETE A proposed power-saving equipment has a purchase price of $580,000. The equipment will be used in a four-year project but is classified as five-year MACRS property for tax purposes. The equipment is expected to save $280,000 before taxes per year in energy costs, and it will have a salvage value of $60,000 at the end of the project. To decide on the feasibility of the investment, the managers have ordered a series of tests to determine whether the proposed equipment will realize the required costs savings or not for a total cost of $18,000. The required rate of return on the equipment is 14% and it is expected to increase working capital by $45,000 at the beginning of the project. The tax rate is 35 percent and the MACRS depreciation schedule is as follows: Year 1 2 3 5 6 MACRS 20.00% 32.00% 19.20 % 11.52% 11.52% 5.76% The terminal cash flow for this project is IR LIVETE
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To calculate the terminal cash flow for this project we need to consider the remaining value of the ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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