ZuoTi.Pro
Question

You are evaluating a potential investment in equipment. The equipment's basic price is $187,000, and shipping...

You are evaluating a potential investment in equipment. The equipment's basic price is $187,000, and shipping costs will be $3,700. It will cost another $22,400 to modify it for special use by your firm, and an additional $9,400 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 24,500 at the end of three years. The equipment is expected to generate revenues of $165,000 per year with annual operating costs of $91,000. The firm's marginal tax rate is 35.0%. What is the after-tax operating cash flow for year 2?

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

Homework Answers

Answer #1

operating cash flow in year 2 = (sales - costs) * (1-tax rate) + depreciation * tax rate

= (165000 - 91000) * (1-0.35) + 0.45 * 187000 * 0.35

= 77552.5

0 0
Add a comment
Know the answer?
Add Answer to:
You are evaluating a potential investment in equipment. The equipment's basic price is $187,000, and shipping...
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 are evaluating a potential investment in equipment. The equipment's basic price is $158,000, and shipping...

    You are evaluating a potential investment in equipment. The equipment's basic price is $158,000, and shipping costs will be $6,300. It will cost another $15,800 to modify it for special use by your firm, and an additional $7,900 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 26,300 at the...

  • 1) You are evaluating a potential investment in equipment. The equipment's basic price is $187,000, and shipping costs will be $3,700. It will cost another $22,400 to modify it for special use by...

    1) You are evaluating a potential investment in equipment. The equipment's basic price is $187,000, and shipping costs will be $3,700. It will cost another $22,400 to modify it for special use by your firm, and an additional $9,400 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 24,500 at...

  • Question 30 (3.5 points) You are evaluating a potential investment in equipment. The equipment's basic price...

    Question 30 (3.5 points) You are evaluating a potential investment in equipment. The equipment's basic price is $190,000, and shipping costs will be $5,700. It will cost another $24,700 to modify it for special use by your firm, and an additional $11,400 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15 % the third year, and 7% the fourth year. You expect to sell the...

  • A company is evaluating the acquisition of a new piece of equipment. The base price of...

    A company is evaluating the acquisition of a new piece of equipment. The base price of the equipment is $100,000 and it will cost an additional $10,000 for shipping and installation. The company also paid a firm $5,000 to determine the feasibility of the new piece of equipment. The equipment falls in the MACRS 3 year class and would be sold after 4 years for $18,000. The new equipment would require an increase in inventory of $4,000, which will be...

  • You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks...

    You are evaluating a potential purchase of several light-duty trucks. The initial cost of the trucks will be $170,000. The trucks fall in the MACRS 5-year class that allows depreciation of 20% the first year, 32% the second year, 19% the third year, 12% the fourth year, 11% the fifth year, and 6% the sixth year. You expect to sell the trucks for 20,400 at the end of five years. The expected revenue associated with the trucks is $135,000 per...

  • You are tasked with evaluating the purchase of a vending machine for the snack room. The...

    You are tasked with evaluating the purchase of a vending machine for the snack room. The base price is $4,000 and it would cost another $1,000 to modify the machine to install the machine. The equipment falls in the MACRS 3 year class of depreciation with rates of 33%, 45%, 15% and 7%. The machine would require an investment in snacks (inventory/net operating working capital) of $500. The machine would produce revenue of $3,000 per year with costs of $534...

  • Please use Excel spreadsheets to analyze problems EI, E2, and E3. On the spreadsheet please show...

    Please use Excel spreadsheets to analyze problems EI, E2, and E3. On the spreadsheet please show all inputs and work clearly. Attach the spreadsheet output with the rest of your homework. E1) The Harris Company is evaluating the proposed acquisition of a spectrometer for the firm's R&D department. The equipment's base price is $140,000, and it would cost another $30,000 to modify it for special use by the firm. The spectrometer, which falls into the MACRS 3-year class, would be...

  • You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...

    You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $170,000, and it would cost another $34,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $51,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have...

  • 13-7 New-Project Analysis The president of the company you work for has asked you to evaluate...

    13-7 New-Project Analysis The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's RAD depart- ment. The equipment's basic price is $70,000, and it would cost another $15,000 to modify it for special use by your firm. The chromatograph, mwhich falls into the MACRS 3-year class, would be sold after 3 years for $30,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481....

  • New-Project Analysis The president of the company you work for has asked you to evaluate the...

    New-Project Analysis 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 $190,000, and it would cost another $28,500 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 $47,500. The MACRS rates for the first 3 years are 0.3333, 0.4445 and 0.1481. Use of...

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