# fin 500 homework week 10

Question # 00004836 Posted By: mac123 Updated on: 12/07/2013 04:34 AM Due on: 12/31/2013
Subject Accounting Topic Accounting Tutorials:
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.

 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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1. ## Solution: fin 500 homework week 10

Tutorial # 00004633 Posted By: mac123 Posted on: 12/07/2013 04:50 AM
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