fin 500 homework week 10

fin 500 homework week 10

Question
	
Problem 1



Suppose
new instruments for a firm cost $18,000 with an additional installation fee of
$2,000, both of which are depreciable. Complete the depreciation schedule shown
below using the Modified Accelerated Cost Recovery System (MACRS) 3-year class.















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Basis

 		
 
 
Depreciation

 		


 

 
 
1

 		
 

 

 



 

 
 
2

 		
 

 

 



 

 
 
3

 		
 

 

 



 

 
 
4

 		
 

 

 
















Problem 2



A
company is evaluating a proposed 4-year project. The depreciable cost will include the
following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for
installation. The depreciation life is under the MACRS 3-year class, with a
salvage value of $45,000. The inventories will rise by $18,000 and accounts
payable will rise by $3,000. In addition, the new sales are estimated to be
150,000 units per year at $2.25 per unit. There is a variable operating cost
that is 60% of sales and the company’s marginal tax rate is 35%. Determine the net operating cash flow for the
initial year (Year 0).












Problem 3



A
company is evaluating a proposed 4-year project. The depreciable cost will include the
following: $300,000 for the equipment, $20,000 for shipping, and $30,000 for
installation. The depreciation life is under the MACRS 3-year class, with a
salvage value of $45,000. The inventories will rise by $18,000 and accounts
payable will rise by $3,000. In addition, the new sales are estimated to be
150,000 units per year at $2.25 per unit. There is a variable operating cost
that is 60% of sales and the company’s marginal tax rate is 35%. Determine the net operating cash flow for
Years 1, 2, and 3.












Problem 4



The
net cash flows for any year during the life of capital expenditure project are
equal to the change in ____ plus the change in ____.



a.
earnings
before interest and taxes; depreciation



b.
earnings
before taxes; depreciation



c.
earnings
after taxes; depreciation



d.
revenues;
costs






Problem 5



Depreciation
is based on the asset cost plus all of the following except:



a. shipping costs



b. increase in inventory



c. installation



d. cost of attached equipment acquired
at the same time