Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 11, Problem 11.11P
Calculating initial investment Vastine Medical Inc. is considering replacing its existing computer system, which was purchased 2 years ago at a cost of $325,000. The system can be sold today for $200,000. It is being
- a. Calculate the book value of the existing computer system.
- b. Calculate the after-tax proceeds of its sale for $200,000.
- c. Calculate the initial investment associated with the replacement project.
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Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased
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The system can be sold today for
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b. Calculate the after-tax proceeds of its sale for
$194,000.
c. Calculate the initial investment associated with the replacement project.
Calculating initial investment Vastine Medical, Inc., is considering replacing its existing computer system, which was purchased
3
years ago at a cost of
$324,000.
The system can be sold today for
$193,000.
It is being depreciated using MACRS and a 5-year recovery period (see the table
LOADING...
).
A new computer system will cost
$498,000
to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a
40%
tax rate on ordinary income and capital gains.
a. Calculate the book value of the existing computer system.
b. Calculate the after-tax proceeds of its sale for
$193,000.
c. Calculate the initial investment associated with the replacement project.
Calculating initial investment DuPree Coffee Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed computer-controlled automatic-feed roaster will be $127,000. The firm has a chance to sell its 3-year-old
roaster for $34,900. The existing roaster originally cost $60,800 and was being depreciated using MACRS and a 7-year recovery period (see the table E). DuPree is subject to a 40% 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:
Data Table
Anticipated Changes in Current Assets and
Current Liabilities
(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a
-$19,000
+ 50,600
+ 39,200
+ 70,200
Accruals
spreadsheet.)
Inventory
Accounts payable
Rounded Depreciation Percentages by Recovery Year Using MACRS for
First Four Property Classes…
Chapter 11 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 11.1 - Prob. 11.1RQCh. 11.1 - What three types of net cash flows may exist for a...Ch. 11.1 - Prob. 11.3RQCh. 11.1 - Prob. 11.4RQCh. 11.2 - Explain how to use each of the following inputs to...Ch. 11.2 - How do you calculate the book value of an asset?Ch. 11.2 - Prob. 11.7RQCh. 11.2 - Prob. 11.8RQCh. 11.3 - Prob. 11.9RQCh. 11.3 - Prob. 11.10RQ
Ch. 11.4 - Explain how the terminal cash flow is calculated...Ch. 11 - Book value, taxes, and initial investment Irvin...Ch. 11 - If Halley Industries reimburses employees who earn...Ch. 11 - Iridium Corp. has spent 3.5 billion over the past...Ch. 11 - Prob. 11.3WUECh. 11 - Prob. 11.4WUECh. 11 - Prob. 11.5WUECh. 11 - Prob. 11.1PCh. 11 - Net cash flow and time line depiction For each of...Ch. 11 - Replacement versus expansion cash flows Tesla...Ch. 11 - Sunk costs and opportunity costs Masters Golf...Ch. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Prob. 11.7PCh. 11 - Book value and taxes on sale of assets Troy...Ch. 11 - Prob. 11.9PCh. 11 - Prob. 11.10PCh. 11 - Calculating initial investment Vastine Medical...Ch. 11 - Prob. 11.12PCh. 11 - Prob. 11.13PCh. 11 - Prob. 11.14PCh. 11 - Prob. 11.15PCh. 11 - Prob. 11.16PCh. 11 - Prob. 11.17PCh. 11 - Prob. 11.18PCh. 11 - Prob. 11.19PCh. 11 - Prob. 11.20PCh. 11 - Prob. 11.21PCh. 11 - Prob. 11.22PCh. 11 - Net cash flows for a marketing campaign Marcus...Ch. 11 - Net cash flows: No terminal value Central Laundry...Ch. 11 - Prob. 11.25PCh. 11 - Ethics Problem Cash flow projections are a central...
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