Which will be depreciated using straight--line

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Reference no: EM131306403

A doggy day care center is replacing old equipment and installing three new pieces of equipment for a total cost of $250,000, which will be depreciated using straight--line over four years. The new equipment will allow vets to treat conditions they previous couldn’t address and is expected to boost revenues by $150,000 this year (year 1) and $250,000 for each of the following three years. Costs of good sold for this new equipment are 35% of revenues. General and administrative expenses associated with the equipment are $24,000 per year for the next four years. Net working capital requirements would increase $5,500 during the first year and net working capital would remain at the higher level for the following 3 years. The old equipment being replaced will be sold for $35,000 and has $12,000 of depreciation remaining. If the marginal tax rate is 35%, what are the incremental cash flows related to that start of the project (year 0) and year four (year 4)?

Reference no: EM131306403

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