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# Cash Inflow/Net cost

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I cannot find any help in the textbook for this problem. As I'm taking an online course, finding alternative forms of help proves difficult. Here's the problem:

Bar T Ranches, Inc. is considering buying a new helicopter for \$350,000. The company's old helicopter has a book value of \$85,000, but will only bring \$60,000 if it is sold. The old helicopter can be depreciated at the rate of \$13,500 per year for the next four years. The new helicopter can be depreciated using the 5-year MARCS schedule. The new helicopter is expected to save \$62,000 after taxes through reduced fuel and maintenance expenses. Bar T Ranches is in the 34% tax bracket and has a 12% cost of capital.

a. What is the cash inflow from selling the old helicopter?

b. What is the net cost of the new helicopter?

https://brainmass.com/economics/personal-finance-savings/cash-inflow-net-cost-87103

#### Solution Preview

a. The old helicopter is being sold at a price below the book value. There will be a capital loss and so there will be a tax benefit. The capital loss is ...

#### Solution Summary

The solution explains how to calculate the cash inflow from sale and the net cost of the helicopter

\$2.19
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## Net Present Value and Net Cash Folws

The confectioner corner Inc. would like to buy a new machine that automatically dips chocolates. The dipping operation is currently done largely by hand. The machine the company is considering costs \$100,000. The machine would be usable for 10 years but would requirement of several key parts at the end of the fifth year. These parts would cost \$7000, including installation. After 10 years, the machine could be sold for \$6000.

The company estimates that cost to operate the machine will be \$6500 per year. The present method of dipping costs \$24000 per year. In addition to reducing costs, the new machine will increase the production by 5,500 boxes of chocolate per year. The company realizes a contribution margin of \$2.10 per box. An 18% rate of return is required on all investments.

Required

1. What are net cash inflows that will be provided by the new dipping machine ?
2. Compute the new machine's net present value. Use the incremental cost approach and round all dollar amounts to nearest whole numbaers

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