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?© BrainMass Inc. brainmass.com October 16, 2018, 6:30 pm ad1c9bdddf
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 ...
The solution explains how to calculate the cash inflow from sale and the net cost of the helicopter
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.
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