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K Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.97 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table B) Additional sales revenue from the renewal should amount to $1.18 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 43% of the additional sales. The firm is subject to a tax rate of 21%. (Note: Answer the following questions for each of the next 6 years.) a. What net incremental eamings before depreciation, interest, and taxes will result from the renewal? b. What net incremental operating profits after taxes will result from the renewall? c. What net incremental operating cash inflows will result from the renewal? a. The net incremental profits before depreciation and tax are $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes - X Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 4% 11 Clear all Check answer View an exa Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while

K Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.97 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table B) Additional sales revenue from the renewal should amount to $1.18 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 43% of the additional sales. The firm is subject to a tax rate of 21%. (Note: Answer the following questions for each of the next 6 years.) a. What net incremental eamings before depreciation, interest, and taxes will result from the renewal? b. What net incremental operating profits after taxes will result from the renewall? c. What net incremental operating cash inflows will result from the renewal? a. The net incremental profits before depreciation and tax are $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes - X Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 4% 11 Clear all Check answer View an exa Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4E: Determine cash flows Natural Foods Inc. is planning to invest in new manufacturing equipment to make...
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K Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.97 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table B) Additional sales revenue from the renewal should amount to $1.18 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 43% of the additional sales. The firm is subject to a tax rate of 21%. (Note: Answer the following questions for each of the next 6 years.) a. What net incremental eamings before depreciation, interest, and taxes will result from the renewal? b. What net incremental operating profits after taxes will result from the renewall? c. What net incremental operating cash inflows will result from the renewal? a. The net incremental profits before depreciation and tax are $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes - X Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 4% 11 Clear all Check answer View an exa Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while
Transcribed Image Text:K Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.97 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table B) Additional sales revenue from the renewal should amount to $1.18 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 43% of the additional sales. The firm is subject to a tax rate of 21%. (Note: Answer the following questions for each of the next 6 years.) a. What net incremental eamings before depreciation, interest, and taxes will result from the renewal? b. What net incremental operating profits after taxes will result from the renewall? c. What net incremental operating cash inflows will result from the renewal? a. The net incremental profits before depreciation and tax are $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes - X Percentage by recovery year* Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 4% 11 Clear all Check answer View an exa Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while
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