Compute incremental operating cash flows for bus replacement

Assignment Help Corporate Finance

Reference no: EM131304738

Scenic Tours Inc is a provider of bus tours. The company is considering replacing 10 of its older buses. The existing buses were purchased 4 years ago at a total cost of $2,700,000 and are being depreciated using MACRS and a 5-year recovery period. The total cost of the new buses, which have larger passenger capacity, is $3,000,000. The new buses would also be depreciated using MACRS and a 5-year recovery period. Scenic is subject to 40% tax rate. The table below shows the revenue and cash expenses (excluding depreciation and interest) for the proposed purchase as well as the present fleet.

Required:

Calculate incremental (relevant) operating cash flows for the proposed bus replacement.

Reference no: EM131304738

Questions Cloud

Project that provides annual cash flows : A project that provides annual cash flows of $1,930 for eight years costs $7,700 today. Is this a good project if the required return is 8 percent? What if it's 24 percent? At what discount rate would you be indifferent between accepting the project ..

Exlain two desired characteristics of a board of directors : From the mini case, recommend two desired characteristics of a board of directors. Provide support for your response, citing the ways in which these characteristics usually lead to effective corporate governance.

Growth rate in dividends is expected to be constant : Bayou Okra Farms just paid a dividend of $3.15 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Investors require a return of 13 percent for the first three years, a return of 11 percent for the..

Has countrys economy recovere since the conclusion of crisis : Indicate whether the International Monetary Fund (IMF) or another sovereign state or country provided intervention. Has the country's economy recovered since the conclusion of the crisis?

Compute incremental operating cash flows for bus replacement : Scenic Tours Inc is a provider of bus tours. The company is considering replacing 10 of its older buses. Calculate incremental (relevant) operating cash flows for the proposed bus replacement.

What is the target share price five years from now : YGTB, Inc., currently has an EPS of $1.20 and an earnings growth rate of 5 percent. If the benchmark PE ratio is 17, what is the target share price five years from now? (Do not round intermediate calculations and round your answer to 2 decimal places..

Mature manufacturing firm-reduce the payout : Antiques R Us is a mature manufacturing firm. The company just paid a dividend of $9.65, but management expects to reduce the payout by 4 percent per year indefinitely. If you require a return of 12 percent on this stock, what will you pay for a shar..

Calculate the gross profit margin and profit margin : An alphabetical list of Rikards Company's adjusted accounts at its fiscal year end, August 31,2014, follows. All accounts have normal balances. Calculate the gross profit margin and profit margin

Certain service can be performed satisfactorily by process : Uncle Wilbur’s trout ranch is now for sale for $30,000. Annual property taxes, maintenance, supplies, and so on are estimated to continue to be $3,000 per year. A certain service can be performed satisfactorily by process R, which has a capital inves..

User Account

All Pages