ZuoTi.Pro
Question

You have been asked by the president of your company to evaluate the proposed acquisition of...

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $5,000. Use of the truck will require an increase in NWC (spare parts inventory) of $10,000. The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. What will the operating cash flow for this project be during year 2?

MACRS Rates:

Year 1: 33.33%

Year 2: 44.45%

Year 3: 14.81%

Year 4: 7.41%

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

rate positively ..

Computation of year 2 operating cash flow
i Revenue = 32000
ii Depreciation = 31115
70000*44.45%
iii=i-ii Profit before tax = 885
iv=iii*40% Tax @ 40% 354
v=iii-iv Profit after tax = 531
vi=v+ii Operating cash flow 31646
Ans = 31646
0 0
Add a comment
Know the answer?
Add Answer to:
You have been asked by the president of your company to evaluate the proposed acquisition of...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • You have been asked by the president of your company to evaluate the proposed acquisition of...

    You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $5,000. Use of the truck will require an increase in NWC (spare parts inventory) of $10,000. The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labor....

  • You have been asked by the president of your company to evaluate the proposed acquisition of...

    You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS three-year class, and it will be sold after three years for $5,000. Use of the truck will require an increase in NWC (spare parts inventory) of $10,000. The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labor....

  • You have been asked by the president of your company to evaluate the proposed acquisition of...

    You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,700. Use of the truck will require an increase in NWC (spare parts inventory) of $2,700. The truck will have no effect on revenues, but it is expected to save the firm $16,700 per year in before-tax operating costs, mainly labor....

  • You have been asked by the president of your company to evaluate the proposed acquisition of...

    You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACR 3-year class, and it will be sold after three years for $20,100. Use of the truck will require an increase in NWC (spare parts inventory) of 2,100. The truck will have no effect on revenues, but it is expected to save the firm $17,000 per year in before-tax operating costs, mainly labor....

  • You have been asked by the president of your company to evaluate the proposed acquisition of...

    You have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck for $60000. The truck falls into the MACROS 3 year class and it will be sold after 3 years for $20900. Use of the truck will require an increase in NBC(spare part inventory) of $2900. The truck will have no effect on revenues but it is expected to save the firm $20300 per year in before tax operating costs...

  • 2) You have been asked by the president of your company to evaluate the proposed acquisition...

    2) You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The truck's total price is $60,000. The truck will be depreciated on a straight-ling basis over 5 years, and it will be sold after three years for $22.000 Use of the truck will require an increase in net operating working capital of $2,000. The truck will have no effect on revenues, but it is expected to save the firm...

  • The president of the company you work for has asked you to evaluate the proposed acquisition...

    The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $77,000, and it would cost another $18,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $32,100. The MACRS rates for the first 3 years are 0.3333, 0.4445 and 0.1481. Use of the equipment...

  • The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of...

    The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $79,000, and it would cost another $17,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $26,200. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for...

  • The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of...

    The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $71,000, and it would cost another $15,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $32,400. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for...

  • The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of...

    The president of your company, MorChuck Enterprises, has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $65,000, and it would cost another $20,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $30,300. The MACRS rates for the first three years are 0.3333, 0.4445 and 0.1481. (Ignore the half-year convention for...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT