Bottling plant by purchasing new bottling machine

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Reference no: EM131884116

1. Crown Cola is considering expanding its bottling plant by purchasing a new bottling machine. Below is information on the expansion project

Bottling machine price: 1,000,000

Installation cost: 200,000

Expected life: six years.

Depreciation: straight line over six years.

Anticipated salvage value at the end of six years: $200,000

Expected incremental revenues: 300,000 in year 1, 800,000 in years 2-6.

Expected incremental expenses: 300,000 in year 1, 400,000 in years 2-6.

Required Net Working Capital at year 0: 100,000 (assume that you recoup all of this when you scrap the machine in year 6).

Tax Rate: 35%.

1. True or False?: Firms will generally use straight line deprectation on their financial accounting statements and accelerated depreciation on their tax accounting statements.

Reference no: EM131884116

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