Question

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,200 and sell its old washer for $2,100. The new washer will last for 6 years and save $1,700 a year in expenses. The opportunity cost of capital is 14%, and the firm's tax rate is 21% a. If the firm uses straight-line depreciation over a 6-year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (Negative amounts should be indicated by a minus sign.) b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is NPV if the firm investment is entitled to immediate 100 % bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Annual operating cash flow in year 0 $ 1,595x а. Annual operating cash flow in years 1 to 6 $ 5,541 b. NPV $ 661.42 1,193.48 NPV с.

Answer 1

Cash Outlous at yea (a) Cast of assut E Se After faz Salvage Value of washer 7200 210ali-0.21 (u59) Cash euctflau at y.0 CAm ual'oberating 5541

1to 6 CeahtHous at Sauing DeFraeciation in coat 01200) 500 105 395 Tar @217 Dehreaation 1200 1595

year eVARGI47 (5541) 1 6902.4238 3.8 88697 1-6 15 95 661-49 NPV

శిం0 Coat of aset 200 year o Ater tax Saluage C1659) Value Bonus skprecia tion 1512) 4029 Tar Sauring on 1-6 Sauring Cl- t) - tooll-0.21) = $ 1393

d)as 4D कुo (पo2१) CP PVAfeu P.C (०2१) ০ 1 1- ८ SAHAKGAS 5 222.479 11 १3-५१9 3.888669 13,५3 OT $।।१3.५8 .