Course Project
a)The net bell of the spectrometer would include the authorized represent of the equipment, the modification comprises and the increase in works capital due to having the equipment. Therefore, the net cost would be the $70,000 demonstrate costs, plus the $15,000 in modification costs and the $4,000 in capital, which rivals $89,000.
b)To date the operating cash flows for the three social classs, we pee-pee to find the cost savings after imposees and add the tax of depreciation. To find the cost savings, we befuddle to take the $25,000 that is expected to be saved and cut back it based on a tax of 40%, or $25,000(1-.4), which equals $15,000. The tax on depreciation requires several steps to calculate. We have to add the $70,000 base cost and $15,000 modification to get the depreciable cost of the equipment, which is $85,000. We past use the depreciation rates of .33, .45 and .15 for familys 1, 2 and 3 respectively to find the depreciation expense. We can then apply the 40% tax rate to those expenses.
For year 1, the depreciation expense would equal $85,000 * .33, or $28,050. The tax on the year 1 deprecation would then be $28,050 * .40, which equals $11,220. aft(prenominal) adding $11,020 to the $15,000 in savings, the cash flow for year 1 would equal $26,220.
For year 2, the depreciation expense would equal $85,000 * .
45, or $38,250. The tax on the year 2 deprecation would then be $38,250 * .40, which equals $15,300. After adding $15,300 to the $15,000 in savings, the cash flow for year 2 would equal $30,300.
For year 3, the depreciation expense would equal $85,000 * .15, or $12,750. The tax on the year 3 deprecation would then be $12,750 * .40, which equals $5,100. After adding $5,100 to the $15,000 in savings, the cash flow for year 3 would equal $20,100.
c)The additional cash flow for year 3 would include the salvage value, which is the $30,000 that the company plans to sale the equipment for. With the salvage value, we have to account for the tax that will reduce...If you want to get a full essay, order it on our website: Orderessay
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