Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
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
Question
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Chapter 11, Problem 11.20P
Summary Introduction

To determine:

Operating cash flows of the proposed replacement project.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

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Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow: Existing van New van Original cost $50,000 $92,000 Annual operating cost $19,500 $14,000 Accumulated depreciation $34,000 — Current salvage value of the existing van $25,500 — Remaining life 9 years 9 years Salvage value in 9 years $ 0 $ 0 Annual depreciation $1778 $10,222 If Hartley's Meat Pies replaces the existing delivery van with the new one, over the next 8 years operating income will: increase by $98,000 decrease by $98,000 increase by $60,000 decrease by $60,000
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Chapter 11 Solutions

Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)

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