Question

DuPree Coffee​ Roasters, Inc., wishes to expand and modernize its facilities. The installed cost of a proposed​ computer-controlled automatic-feed roaster will be $ 139,000. The firm has a chance to sell its 5​-year-old roaster for $ 34,600. The existing roaster originally cost $ 60,100

and was being depreciated using MACRS and a​ 7-year recovery period​. DuPree is subject to a 40 % tax rate.

a. What is the book value of the existing​ roaster?

b. Calculate the​ after-tax proceeds of the sale of the existing roaster.

c. Calculate the change in net working capital using the following​ figures:

     ACCRUALS (-19,800)

     INVENTORY (+49,000)

     ACCOUNTS PAYABLE (+41,000)

     ACCOUNTS RECEIVABLE (+70,300)

     CASH (0)

    NOTES PAYABLE (+14,100)

d. Calculate the initial investment associated with the proposed new roaster.

Answer 1