Cash inflow from the sale of the old equipment
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Acme Corp purchased a computerized measuring device two years ago for $80,000. It falls into the five-year category for MACRS depreciation. The equipment can currently be sold for $28,400.
A new piece of equipment will cost $210,000. It also falls into the five-year category for MACRS depreciation.
Assume the new equipment would provide the following stream of added cost savings for the next six years.
Year Cost Savings
1 $76,000
2 66,000
3 62,000
4 60,000
5 56,000
6 42,000
The tax rate is 34 percent and the cost of capital is 12 percent.
Problems:
1. What is the cash inflow from the sale of the old equipment?
2. What is the net cost of the new equipment? (Include the inflow from the sale of the old equipment.)
3. Determine the depreciation schedule for the new equipment.
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Solution Summary
This provides the steps to compute the cash inflow from the sale of the old equipment
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cme Corp purchased a computerized measuring device two years ago for $80,000. It falls into the five-year category for MACRS depreciation. The equipment can currently be sold for $28,400.
A new piece of equipment will cost $210,000. It also falls into the five-year ...
Purchase this Solution
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