Compute levely expected net cash inflow

Assignment Help Accounting Basics

Reference no: EM132635729

Problem - Levely Corporation is considering undertaking a capital project. The company would have to commit $24,000 of working capital in addition to an immediate outlay of $160,000 for new equipment. The project is expected to generate $100,000 of annual income for 10 years. At the end of that time, the new equipment, which will be depreciated on a straight line basis, is expected to have a salvage value of $10,000.

The existing equipment that would be sold to make room for the project that has a historical cost of $220,000 and accumulated depreciation of $208,000. It has an estimated remaining useful life of 2 years and the remaining carrying amount is depreciated on a straight line basis. A scrap dealer has agreed to buy it at $8,000. The company's effective tax rate is 40%.

Required -

(1) If the project is accepted, compute Levely's expected net cash inflow at the end of the first year?

(2) Compute Levely's expected net cash inflow at the end of the final year?

Reference no: EM132635729

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