Homework Answers
There will be no depreciation charge for the year 7, as the depreciation is charged according to the 5-year MACRS classification which will fully depreciate the asset by year 6. So,
OCF for year 7 = [Sales - Variable cost] * [1 - t]
= [$300,000 - ($300,000 * 0.60)] * [1 - 0.20]
= [$400,000 - $240,000] * 0.80
= $160,000 * 0.80 = $128,000
Hence, 5th option is correct.
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10.7
NPV. Miglietti Restaurants is looking at a project with the
following forecasted sales: first-year sales quantity of
35,000, with an annual growth rate of 4.00% over the next ten
years. The sales price per unit will start at $40.00 and will grow
at 2.00% per year. The production costs are expected to be 55% of
the current year's sales price. The manufacturing equipment to aid
this project will have a total cost (including installation) of
$2,300,000. It will...
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity...
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 33,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $43.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,200,000. It will be depreciated...
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, was used for the depreciation schedule, what is the
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Richardses' Tree Farm, Inc. has just purchased a new aerial
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10.7
NPV. Miglietti Restaurants is looking at a project with the
following forecasted sales: first-year sales quantity of
35,000, with an annual growth rate of 4.00% over the next ten
years. The sales price per unit will start at $40.00 and will grow
at 2.00% per year. The production costs are expected to be 55% of
the current year's sales price. The manufacturing equipment to aid
this project will have a total cost (including installation) of
$2,300,000. It will...
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 33,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $43.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,200,000. It will be depreciated...
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Richardses' Tree Farm, Inc. purchased a new aerial tree trimmer
for $94,000. It is classified in the property class category of a
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company sold the tree trimmer after four years of service. If a
seven-year life and MACRS,
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after-tax cash flow from the sale of the trimmer (use a 40%tax
rate) if
a. the sales price was $30,000?
b. the...
10.8 Depreciation expense. (10 Part Answer)
Richardses' Tree Farm, Inc. has just purchased a new aerial
tree trimmer for $89,000. Calculate the depreciation schedule
using aseven-year life (for the property class category of a
single-purpose agricultural and horticultural structure from Table
10.3) for both straight-line depreciation and MACRS,
Use the half-year convention for both methods. Compare the
depreciation schedules before and after taxes using a 40% tax
rate.
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