A flour mill is considering buying a new jumbo sifter, which would have an installed cost of $80,000. The new one would replace the existing sifter that was purchased 3 years ago at an installed cost of $60,000. If the company moves forward with the replacement, it could sell the old sifter for $19,000. Purchasing the new sifter would result in the company's current assets increasing by $10,000 and current liabilities increasing by $8,000. The company uses the 5-year MACRS table for depreciation and is taxed at 21%. a) What is the accumulated depreciation of the old sifter? b) What is the current book value of the old sifter? c) What is the amount of depreciation recapture/recovery?
A flour mill is considering buying a new jumbo sifter, which would have an installed cost of $80,000. The new one would replace the existing sifter that was purchased 3 years ago at an installed cost of $60,000. If the company moves forward with the replacement, it could sell the old sifter for $19,000. Purchasing the new sifter would result in the company's current assets increasing by $10,000 and current liabilities increasing by $8,000. The company uses the 5-year MACRS table for depreciation and is taxed at 21%. a) What is the accumulated depreciation of the old sifter? b) What is the current book value of the old sifter? c) What is the amount of depreciation recapture/recovery?
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1nM
Related questions
Question
A flour mill is considering buying a new jumbo sifter, which would have an installed cost of $80,000. The new one
would replace the existing sifter that was purchased 3 years ago at an installed cost of $60,000. If the company
moves forward with the replacement, it could sell the old sifter for $19,000. Purchasing the new sifter would result
in the company's current assets increasing by $10,000 and current liabilities increasing by $8,000.
The company uses the 5-year MACRS table for
- a) What is the accumulated depreciation of the old sifter?
- b) What is the current book value of the old sifter?
- c) What is the amount of depreciation recapture/recovery?
- d) What is the tax on the sale of the old sifter?
- e) What are the after-tax proceeds from the sale of the old sifter?
- f) What is the change in Net Working Capital?
- g) What is the initial investment for the project?
(please show how this could be solved using an Excel formula function)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning