Question

1.Using the information from problem 8 on Alpha & Omega, what is the equivalent annual annuity (EAA) for System A? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

2.XYZ Corporation is considering the acquisition of a new piece of equipment. The new equipment costs $250,000, plus it will cost $10,000 to ship it to XYZ, and it will cost $5,000 to install it at XYZ. The equipment has a 10-year class life and will be depreciated by the MACRS depreciation system. What amount of depreciation will be expensed in Year 2? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.

3.Liberty Services is now at the end of the final year of a project. The equipment originally cost $125,500, of which 75% has been depreciated. The firm can sell the used equipment today for $48,000, and its tax rate is 30%. What is the equipment’s after–tax salvage value for use in capital budgeting analysis? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.​​​​​​​

4.Medium Sized Retailer’s balance sheet showed total current assets of $195,000, all of which were required in operations. Its current liabilities consisted of $62,500 of accounts payable, $40,000 of 7% short–term notes payable to the bank, and $19,750 of accrued wages and taxes. What was its net operating working capital? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.​​​​​​​

5.

You work for Diversified Industries, and you must estimate the Year 1 operating cash flow for a project with the following data. What is the Year 1 after-tax net operating cash flow? Enter your answer rounded to two decimal places. Do not enter $ or comma in the answer box. For example, if your answer is $12,300.456 then enter as 12300.46 in the answer box.
	Sales revenues			$155,000
	Depreciation			$44,000
	Cash operating costs			$68,000
	Tax rate			35%

Answer 1

Q1 information provided in Problem 8 is needed to answer

Q2. MACRS 10 Year Class Year 2 Depreciation rate = 18%

Year 2 Depreciation = Cost of Asset * 18%

Year 2 Depreciation = (250000 + 10000 + 5000) * 18%

Year 2 Depreciation = $47700.00

Q3. After Tax Salvage Value = Sale Price - (Sale Price - Book Value) * Tax

After Tax Salvage Value = 48000 - (48000 - 125500*0.25) * 0.30

After Tax Salvage Value = 48000 - 4987.50

After Tax Salvage Value = $43012.50

Q4. Net Operating Working Capital = Current Assets - Accounts Payable - Accrued wages

Net Operating Working Capital = 195000 - 62500 - 19750

Net Operating Working Capital = 112750.00

Q5. Year 1 Operating Cash Flow = (Sales - Depreciation - Cash Operating Costs) * (1 - tax) + Depreciation

Year 1 Operating Cash Flow = (155000 - 44000 - 68000) * (1 - 0.35) + 44000

Year 1 Operating Cash Flow = 27950 + 44000

Year 1 Operating Cash Flow = $71950.00