fin 500 homework week 10

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Description

Problem 1

Suppose
new instruments for a firm cost $18,000 with an additional installation fee of
$2,000, both of which are depreciable. Complete the depreciation schedule shown
below using the Modified Accelerated Cost Recovery System (MACRS) 3-year class.

Year

Rate

Basis

Depreciation

1

2

3

4

Problem 2

A
company is evaluating a proposed 4-year project. The depreciable cost will include the
following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for
installation. The depreciation life is under the MACRS 3-year class, with a
salvage value of $45,000. The inventories will rise by $18,000 and accounts
payable will rise by $3,000. In addition, the new sales are estimated to be
150,000 units per year at $2.25 per unit. There is a variable operating cost
that is 60% of sales and the company’s marginal tax rate is 35%. Determine the net operating cash flow for the
initial year (Year 0).

Problem 3

A
company is evaluating a proposed 4-year project. The depreciable cost will include the
following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for
installation. The depreciation life is under the MACRS 3-year class, with a
salvage value of $45,000. The inventories will rise by $18,000 and accounts
payable will rise by $3,000. In addition, the new sales are estimated to be
150,000 units per year at $2.25 per unit. There is a variable operating cost
that is 60% of sales and the company’s marginal tax rate is 35%. Determine the net operating cash flow for
Years 1, 2, and 3.

Problem 4

The
net cash flows for any year during the life of capital expenditure project are
equal to the change in ____ plus the change in ____.

a.
earnings
before interest and taxes; depreciation

b.
earnings
before taxes; depreciation

c.
earnings
after taxes; depreciation

d.
revenues;
costs

Problem 5

Depreciation
is based on the asset cost plus all of the following except:

a. shipping costs

b. increase in inventory

c. installation

d. cost of attached equipment acquired
at the same time

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