Year MACRS Depreciation Allowances for 3-year Property Class 1234 4 33.33% 44.44% 14.82% 7.41% Your company...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66496ca4ecbbf_97266496ca42e33e.jpg)
Transcribed Image Text:
Year MACRS Depreciation Allowances for 3-year Property Class 1234 4 33.33% 44.44% 14.82% 7.41% Your company just bought a new distillation unit for $2,000,000. Such equipment has a 3-year modified accelerated cost recovery system (MACRS) classification. a) What is the book value of the distillation unit at the end of year 3? Use the $2,000,000 cost of the unit and the MACRS table above to find the book value. b) If the distillation unit will be sold in 3 years for $400,000 (before taxes), what is the after-tax cash flow (i.e., after-tax salvage value or after-tax resale value) from the sale? The tax rate is 25 percent. c) The distillation unit is used in a project that has a three-year life. The project is expected to generate the following operating cash flows. The initial investment required for the project is the cost of purchasing the distillation unit of $2,000,000. The project also requires an initial net working capital cash flow of $100,000, which is fully recoverable when the project ends in year3. It has no other cash flows besides the operating cash flows, the initial net working capital requirement, and the cash flow from selling the equipment at the end of the project in (b). If the required rate of return on the project is 14 percent, what is the net present value of the project? Should it be accepted? Why? Year MACRS Depreciation Allowances for 3-year Property Class 1234 4 33.33% 44.44% 14.82% 7.41% Your company just bought a new distillation unit for $2,000,000. Such equipment has a 3-year modified accelerated cost recovery system (MACRS) classification. a) What is the book value of the distillation unit at the end of year 3? Use the $2,000,000 cost of the unit and the MACRS table above to find the book value. b) If the distillation unit will be sold in 3 years for $400,000 (before taxes), what is the after-tax cash flow (i.e., after-tax salvage value or after-tax resale value) from the sale? The tax rate is 25 percent. c) The distillation unit is used in a project that has a three-year life. The project is expected to generate the following operating cash flows. The initial investment required for the project is the cost of purchasing the distillation unit of $2,000,000. The project also requires an initial net working capital cash flow of $100,000, which is fully recoverable when the project ends in year3. It has no other cash flows besides the operating cash flows, the initial net working capital requirement, and the cash flow from selling the equipment at the end of the project in (b). If the required rate of return on the project is 14 percent, what is the net present value of the project? Should it be accepted? Why?
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Increasingly sophisticated communications technology is allowing more people to work at home. What effect do you think this might have on land-use patterns, specifically the density of residential...
-
Systematic versus Unsystematic Risk Classify the following events as mostly systematic or mostly unsystematic. Is the distinction clear in every case? a. Short-term interest rates increase...
-
A \(28.0 \mathrm{~cm}\) long column packed with gas-phase activated carbon is initially filled with clean air. At \(\mathrm{t}=0\), a feed gas containing \(\mathrm{y}=0.10 \mathrm{wt} \%\) toluene in...
-
Material price and quantity variances The BanULaura Company uses three materials in the production of aquariums and terrariums. Actual output is 680 units. Material standards and actual results are...
-
The comparative financial statements of Lakeland Cosmetic Supply for 2012, 2011, and 2010 include the data shown here: Requirements 1. Compute these ratios for 2012 and 2011: a. Acid-test ratio b....
-
Please complete all the parts Name: 1. Consider the following curve over the indicated interval. y = Inx, 15x52 (a) (4 points) Find the derivative of the curve with respect to the appropriate vari-...
-
Complete the "Rate Category" column on the "Airline" worksheet. After completing the column do exploratory analysis of the airline data to determine how many Airlines fall under Category A ? Use the...
-
The following events apply to Santana Co for the 2021 fiscal year: 1 Received 2 Paid 3 Paid 4 Earned: 5 Paid $105,000 cash from the issue of common stock. $50,000 cash for a new for Vehicle. $34,000...
-
An alfalfa co-op has an agreement with its farmers to purchase alfalfa at a.price that is currently above the existing market price. In addition, the co-op has agreed to pay the farmers interest at 2...
-
Discuss the parameters that affect the switching power dissipation in a CMOS inverter.
-
Discuss how more sophisticated (compared to the basic NOR and NAND) logic functions can be implemented in a single CMOS logic circuit.
-
Define the noise margin in a CMOS inverter.
-
Show that $\left[E_{\alpha}, E_{\beta} ight]$ is proportional to $E_{\alpha+\beta}$. What if $\alpha+\beta$ is not a root?
-
In a rising interest rate environment, how would bond values change over time? As a bond investor, what measures would you take to manage rate risk?
-
Feller Company purchased a site for a limestone quarry for $100,000 on January 2, 2019. It estimate that the quarry will yield 400,000 tons of limestone. It estimates that its retirement obligation...
-
Prepare year-end adjusting entries for each of the following: 1. Office Supplies has a balance of $168 on January 1. Purchases debited to Office Supplies during the year amount to $830. A year-end...
-
How should the general manager divide his or her time between monitoring current-year results and planning for the future?
-
What is a business model, and what are its key elements?
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App