DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $135,000. The firm has a chance to sell its 5-year-old roaster for $34,000. The existing roaster originally cost $60,500 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 −$19,500 Inventory +50,000 Accounts payable +40,900 Accounts receivable +70,200 Cash 0 Notes payable +14,400
DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $135,000. The firm has a chance to sell its 5-year-old roaster for $34,000. The existing roaster originally cost $60,500 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 −$19,500 Inventory +50,000 Accounts payable +40,900 Accounts receivable +70,200 Cash 0 Notes payable +14,400
Chapter10: Capital Budgeting: Decision Criteria And Real Option
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
$135,000.
The firm has a chance to sell its 5-year-old roaster for $34,000. The existing roaster originally cost $60,500 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
|
−$19,500
|
|
Inventory
|
+50,000
|
|
Accounts payable
|
+40,900
|
|
Accounts receivable
|
+70,200
|
|
Cash
|
0
|
|
Notes payable
|
+14,400
|
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