Proposed Project Equipment cost plus installation Increase in current assets $15,000 S142,858 Equip. market value at end of 3 yrs Tax rate $30,000 40% $13,000 100,000 Increase in payables and accruals Unit sales Sales price per unit Variable cost per unit (in dollars) WACC 100% S4.00 S2.25 Fixed costs S65,000 Table 12A.2 Recovery Allowance Percentage for Personal Property Class of Investment Ownership Year 3-year 5-year 7-year 33% 20% 14% 2 45 32 25 3 15 19 17 4 7 12 13 11 9 6 6 7 9 8 9 10 11 100% 100% 100% 1) What is the Ending Book Value at the end of year 3 using: $ 2) What is the Net cash flow from salvage at the end of year 3? S

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1) What is the Ending Book Value at the end of year 3 using MACRS: $ 
 
2) What is the Net cash flow from salvage at the end of year 3? $
Proposed Project
Equipment cost plus installation
Increase in current assets
$15,000
S142,858
Equip. market value at end of 3 yrs
Tax rate
$30,000
40%
$13,000
100,000
Increase in payables and accruals
Unit sales
Sales price per unit
Variable cost per unit (in dollars)
WACC
100%
S4.00
S2.25
Fixed costs
S65,000
Table 12A.2
Recovery Allowance Percentage
for Personal Property
Class of Investment
Ownership Year
3-year
5-year
7-year
33%
20%
14%
2
45
32
25
3
15
19
17
4
7
12
13
11
9
6
6
7
9
8
9
10
11
100%
100%
100%
1) What is the Ending Book Value at the end of year 3 using: $
2) What is the Net cash flow from salvage at the end of year 3? S
Transcribed Image Text:Proposed Project Equipment cost plus installation Increase in current assets $15,000 S142,858 Equip. market value at end of 3 yrs Tax rate $30,000 40% $13,000 100,000 Increase in payables and accruals Unit sales Sales price per unit Variable cost per unit (in dollars) WACC 100% S4.00 S2.25 Fixed costs S65,000 Table 12A.2 Recovery Allowance Percentage for Personal Property Class of Investment Ownership Year 3-year 5-year 7-year 33% 20% 14% 2 45 32 25 3 15 19 17 4 7 12 13 11 9 6 6 7 9 8 9 10 11 100% 100% 100% 1) What is the Ending Book Value at the end of year 3 using: $ 2) What is the Net cash flow from salvage at the end of year 3? S
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