DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $123,000. The firm has a chance to sell its 4-year-old roaster for $34,200. The existing roaster originally cost $59,700 and was being depreciated using MACRS and a 7-year recovery period (see the table attached: DuPree is subject to a 21% tax rate. a. What is the book value of the existing roaster? b. Calculate the after-tax proceeds of the sale of the existing roaster. c. Calculate the change in net working capital using the following figures: Anticipated Changes in Current Assets and Current Liabilities Accruals −$20,600 Inventory +50,100 Accounts payable +39,800 Accounts receivable +69,400 Cash 0 Notes payable +14,900 d. Calculate the initial cash flow associated with the proposed new roaster.
DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $123,000. The firm has a chance to sell its 4-year-old roaster for $34,200. The existing roaster originally cost $59,700 and was being depreciated using MACRS and a 7-year recovery period (see the table attached: DuPree is subject to a 21% tax rate. a. What is the book value of the existing roaster? b. Calculate the after-tax proceeds of the sale of the existing roaster. c. Calculate the change in net working capital using the following figures: Anticipated Changes in Current Assets and Current Liabilities Accruals −$20,600 Inventory +50,100 Accounts payable +39,800 Accounts receivable +69,400 Cash 0 Notes payable +14,900 d. Calculate the initial cash flow associated with the proposed new roaster.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 14P
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DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $123,000. The firm has a chance to sell its 4-year-old
roaster for $34,200. The existing roaster originally cost $59,700
and was being depreciated using MACRS and a 7-year recovery period (see the table attached:
roaster for $34,200. The existing roaster originally cost $59,700
and was being depreciated using MACRS and a 7-year recovery period (see the table attached:
DuPree is subject to a 21% tax rate.
a. What is the book value of the existing roaster?
b. Calculate the after-tax proceeds of the sale of the existing roaster.
c. Calculate the change in net working capital using the following figures:
|
Anticipated Changes in Current Assets and Current Liabilities
|
|
|
Accruals
|
−$20,600
|
|
Inventory
|
+50,100
|
|
Accounts payable
|
+39,800
|
|
Accounts receivable
|
+69,400
|
|
Cash
|
0
|
|
Notes payable
|
+14,900
|
d. Calculate the initial cash flow associated with the proposed new roaster.
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