Operating cash flow
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Please see below for what I need help with (and please show all work). Thanks in advance.
1. Tabletop Ranches, Inc. is considering the purchase of a new helicopter for $350,000. The firm's old helicopter has a book value of $85,000, but it can only be sold for $60,000. It was being depreciated at the rate of $13,500 per year for four more years under an old depreciation method.
The new helicopter will be depreciated using the 5-year MACRS schedule. It is expected to save $62,000 after taxes through reduced fuel and maintenance expenses. Tabletop Ranch is in the 34% tax bracket and has a 12% cost of capital.
a. Calculate the cash inflows from selling the old helicopter.
b. Calculate the net cost of the new helicopter.
c. Calculate the incremental depreciation for the new helicopter.
d. Calculate the net cash flows for the purchase.
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Solution Summary
Step by step calculation of oprating cash flow when and old machine is replaced for a new one
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