Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $45,000; it is now five years old, and it has a current market value of $20,000. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $22,500 and an annual depreciation expense of $4,500. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $3,400 a year over its life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent Assume a 21 percent tax rate. What will the cash flows for this project be? (Note that the $45,000 cost of the old oven is depreciated over ten years at $4,500 per year. The half-year convention is not used for the old oven. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.) Year FCF 0 1 2 3 4 5 Mom's Cookies, Inc., is considering the purchase of a new cookie oven. The original cost of the old oven was $45,000; it is now five years old, and it has a current market value of $20,000. The old oven is being depreciated over a 10-year life toward a zero estimated salvage value on a straight-line basis, resulting in a current book value of $22,500 and an annual depreciation expense of $4,500. The old oven can be used for six more years but has no market value after its depreciable life is over. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash savings from the new oven are $3,400 a year over its life, you can use bonus depreciation on the oven, and the cost of capital is 10 percent Assume a 21 percent tax rate. What will the cash flows for this project be? (Note that the $45,000 cost of the old oven is depreciated over ten years at $4,500 per year. The half-year convention is not used for the old oven. Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places.) Year FCF 0 1 2 3 4 5
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Following is the condensed balance sheet of Martinez, O'Neill and Clemens, partners who share profits or losses in the ratio of 2 : 3 : 5. Cash $50,000 Liabilities $200,000 Other assets 1,050,000...
-
Demonstrate that the two Ohm's law expressions, Equations 18.1 and 18.5, areequivalent. V = IR (18.1) J = oE (18.5)
-
What are two primary qualities of accounting information that contribute to decision usefulness?
-
Laura Stiner started her own consulting firm, Stiner Consulting, Inc. on May 1. 2006. The following transactions occurred during the month of May. May 1 Stiner invested $8,000 cash in the business. 2...
-
Raquel Covington is a graduate student majoring in environmental management. In one particular class, Raquel has maintained a low A average throughout the semester, and she needs an A or a high B on...
-
FR4. (10 pts total) Use the Divergence Theorem to find the net outward flux of F(x, y, z) = (x + 3y, y + 2z, 23 + 4x) across the sphere of radius 3 centered at the origin. Note: The Divergence...
-
Portfolio adjustment: After a successful tenure at central budgeting division, it's now time to spend some time with Portfolio management division. One of the main tasks of this division is to invest...
-
Determine the infinite limit, show all work x + 4x lim x-3x - 2x - 3
-
Suppose your factory production line has two stations linked in series. Every raw material coming into your line is processed by Station A first. Then, the product goes to Station B for finishing....
-
News about the recent wildfires generally talk about number of acres burned by the fires. Most people don't think in terms of acres. If an acre is defined to be 4840 square yards, then , i. How many...
-
Study of communication: Summarize the benefits of being an effective listener. TED talk: "The Power of Listening" Julian Treasure How does this talk relate to the study of communication? What...
-
1. The First Amendment clearly prohibits any restrictions on the freedom of speech. Does this mean that in the US we have absolute freedom of speech? 2. Read through/review the US Supreme Court's...
-
Please answer with detailed calculations , good formatting and explanations else a downvote will be given. Submit the solution only if the answer is 100% correct else skip for other tutor. otherwise...
-
Pedro Bourbone is the founder and owner of a highly successful small business and, over the past several years, has accumulated a significant amount of personal wealth. His portfolio of stocks and...
-
Accounting for joint products You have just been hired as the chief cost accountant for the J&M Company. Its major product group is four food processing solutions, which are pro- duced in a joint...
-
Analyzing the impact of different joint costing methods Petro-Edge Corporation manu- factures specialized oils and lubricants for the aviation industry. One product group, manufactured in a joint...
-
Analyzing Joint and by-product data with standard costs Haverly Company makes two chemical solvents used in the production of cleaning compounds. The products are manufactured in a joint production...
Study smarter with the SolutionInn App