Firm uses straight-line depreciation to assumed salvage

Assignment Help Financial Management

Reference no: EM131902595

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,600 and sell its old washer for $900. The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 20%, and the firm’s tax rate is 40%.

a. If the firm uses straight-line depreciation to an assumed salvage value of zero over a 6-year life, what is the annual operating cash flow of the project in years 1 to 6? The new washer will in fact have zero salvage value after 6 years, and the old washer is fully depreciated.

b. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is NPV if the firm uses MACRS depreciation with a 5-year tax life? Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131902595

Questions Cloud

Describe how to keep these machines updated : You need to keep these machines updated with the newest updates. Of course, you need to avoid any problems when deploying the updates.

Validity of comparative ratio analysis questionable : What strengths and weaknesses are revealed by the ratio analysis? Under what circumstances is the validity of comparative ratio analysis questionable?

Measure the effectiveness of change management plan : The board of directors at AGC needs a status update on your change management project. Shawn asks you to write an executive report for John and the board.

Have the directors breached any legal duty : You lead a multi-disciplinary team that deals with compliance issues for GoodHealth, Inc., a large healthcare provider that owns four hospitals.

Firm uses straight-line depreciation to assumed salvage : If the firm uses straight-line depreciation to an assumed salvage value of zero over 6-year life, what is the annual operating cash flow of project in years 1-6

Should companies be allowed to patent organisms : What degree are you working toward? What is your progress in accomplishing your education goals and what are the next courses you taking

Direct access to the hyper-v hosts : Describe the steps you should take so that developers manage their own machines yet not have direct access to the Hyper-V hosts.

What was the number one difficulty that pedro menendez had : What was the number one difficulty that Pedro Menendez de Avilés had to overcome in establishing Spanish settlements in La Florida?

Explain the importance of random sampling : Explain the importance of random sampling. What problems/limitations could prevent a truly random sampling and how can they be prevented

User Account

All Pages