Problem 1
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Write My Essay For MeSuppose 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.
| Year | Rate | 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
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