ABC, Inc. purchased an equipment at time=0 for $83,515. The shipping and installation costs were $24,451. The equipment is classified as a 5-year MACRS property. The investment in net working capital at time=0 was $7,345 which would be recouped at the end of the project. The project life is five years. At the end of the fifth year, the company will sell the equipment for $34,265. The annual cash flows are $44,618. What is the cash flow of the project in Year 5? That is, solve for CF5. Assume that the tax rate is 12%
The MACRS allowance percentages are as follows, starting with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
Note: In the last year of the project, the Total Cash Flow = Operating Cash Flow + Terminal Cash Flow
Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.
rate positively ..
| Computation of year 5 cash flow | ||||||
| A) Annual cash flow = | 44,618.00 | |||||
| B) Computation of post tax salvage value = | ||||||
| Book value of asset at end of 5th year | 6,218.84 | |||||
| (83,515+24,451)*5.76% | ||||||
| Sales price = | 34,265.00 | |||||
| Profit on sale = | 28,046.16 | |||||
| Tax on profit @ 12% | 3,365.54 | |||||
| Post tax salvage value =34256-3366 | 30,899.46 | |||||
| C) Release of net working capital = | 7,345.00 | |||||
| Therefore year 5 cash flow = A+B+C | 82,862.46 | |||||
| Ans = | 82,862.46 | |||||
ABC, Inc. purchased an equipment at time=0 for $83,515. The shipping and installation costs were $24,451....
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