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# John Crockett Furniture Company

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John Crockett Furniture Company - Cash Flow. See attached file for full problem description.

#### Solution Preview

a. The projects time line is attached.

b. (1) The incremental cash flows are calculated below :
We first calculate the depreciation using the MACRS 3 years depreciation table
The depreciation basis is the total cost incurred to make the machine operational
Cost of machine 200,000
Shipping Charges 10,000
Installation 30,000
Total cost 240,000

YEAR RATE &#61620;&#61472; BASIS = DEPRECIATION
1 0.33 \$240 \$ 79.2
2 0.45 240 108
3 0.15 240 36
4 0.07 240 16.8

Annual Operating Cash Flows
Year 1 Year 2 Year 3 Year 4
Units 1250 1250 1250 1250
Unit price \$200.00 \$206.00 \$212.18 \$218.55
Unit cost \$100.00 \$103.00 \$106.09 \$109.27 ...

#### Solution Summary

The solution explains the capital budgeting decision of adding an new line to the product mix by John Crockett Furniture Company.

\$2.49