Here :
Ans a )
Year Zero Net Cash Flow = Equipment Base Price
+ Modification Cost + Increase in Working Capital
= 229,900 (Ans a) It will be - Ve Value
04. MACRS Schedule given as in Question
05. Depreciation = Equipment Price allowed for depreciation * Depreciation as per schedule
Equipment Price allowed for depreciation = Equipment Base Price
+ Modification Cost
6. Tax Savings = Tax Rate ( 40%) * Depreciation
7.Savings due to New Machines (After Tax) = Beforetax Savings due to new m/c * Tax Rate = 57000 * 0.4
8. Operating Cash Flow = Tax Savings + Savings due to New Machines
Ans b : Operating Cash Flow
Year 01 = 63,330
Year 02 = 73049
Year 03 = 47144
Ans C :
Total Depreciation Till Year 03
= Cummulative Depriciation Till Year 03 * Equipment Price allowed for depreciation
= (0.3333 + 0.4445+ 0.1481) * (190000+ 28500) = 202,309.15
Book Value of Machine = Equipment Price allowed for depreciation - Total Depreciation Till Year 03
= (190000+ 28500) - 202,309.15 = 16190.85
Selling Price = 47500
Tax Payble =(Selling Price -Book Value of Machine )*0.4 = 12523.66
Amount of Net Additional Cash flow = Selling Price - Tax Payble
= 47500 - 12,523.66 = 34976.34
New-Project Analysis The president of the company you work for has asked you to evaluate the...
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