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Cash inflow from the sale of the old equipment

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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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 ...

Solution Summary

This provides the steps to compute the cash inflow from the sale of the old equipment

$2.19