Operating Cash Flows.
Talia's Tutus bought a new sewing machine for $40,000 that will be depreciated using theMACRS depreciation schedule for a 5-year recovery period.(LO3)a.Find the depreciation charge each year.b.If the sewing machine is sold after 3 years for $22,000, what will be the after-tax proceeds on the sale ifthe firm's tax bracket is 35%?
Cash Flows and Working Capital.A firm had after-tax income last year of $1.2 million. Its depreciationexpenses were $.4 million, and its total cash flow was $1.2 million. What happened to net working capital duringthe year?(LO4)
Depreciation and Project Value. Bottoms Up Diaper Service isconsidering the purchase of a new industrial washer. It can purchase the washer for$6,000 and sell its old washer for $2,000. The new washer will last for 6 years andsave $1,500 a year in expense.
The opportunity cost of capital is 16 percent, and thefirm's tax rate is 40 percent.
a. If the firm uses straight-line depreciation to an assumed salvage value of zeroover a 6-year life, what are the cash flows of the project in years 0 to 6? The newwasher will in fact have zero salvage value after 6 years, and the old washer isfully depreciated.
b. What is project NPV?
c. What is NPV if the firm uses MACRS depreciation with a 5-year tax life?