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Chapter 10Problems 6,7,10,14,18,20,21,25
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
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Chapter 10Question 6
Input area:
Costs
*7-year property under MACRS
Output area:
Yr. Beginning Book Value MACRS Depreciation1 -$ 0.1429 -$
2 - 0.2449 -
3 - 0.1749 -
4 - 0.1249 -
5 - 0.0893 -
6 - 0.0893 -
7 - 0.0893 -
8 - 0.0445 -
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Ending Book value-$
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Chapter 10Question 7
Input area:
Costs
Pretax salvage value
Tax rate
*Depreciation straight line
*Asset used in years
Output area:
Book Value #DIV/0!
Aftertax cash flow #DIV/0!
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Chapter 10Question 10
Input area:
Asset investment
Estimated annual sales
Costs
Tax rate
*Depreciation straight-line
to zero over tax life
OCF
Required return
Output area:
NPV -$
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Chapter 10Question 14
Input area:
Initial investment
Pretax salvage value
Cost savings per year
Working capital reduction
Tax rate
*Depreciation straight-line
over life
Output area:
Annual depreciation charge #DIV/0!
Aftertax salvage value -$
OCF #DIV/0!
Year Cash flow
0 -$
1 #DIV/0!
2 #DIV/0!
3 #DIV/0!
4 #DIV/0!
5 #DIV/0!
IRR #VALUE!
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Chapter 10Question 18
Input area:
Quantity
Installation costs
Pretax salvage value
Fixed costs
Variable production cost
per carton
Net working capital
Tax rate
Required return
*Depreciation staight-line
over life
Output area:
Aftertax salvage value -$
Depreciation tax shield #DIV/0!
Initial cash outlay -$
NPV w/o OCF -$
Necessary OCF #NUM!
OCF net of dep. tax shield #NUM!
Bid price #NUM!
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Chapter 10Question 20
Input area:
System A:
Cost
Pretax annual operating cost
Life
System B:
Cost
Pretax annual operating cost
Life
Both:
Tax rate
Discount rate
*Depreciation staight-line
Output area:
System A:
OCF #DIV/0!
NPV #DIV/0!
System B:
OCF #DIV/0!
NPV #DIV/0!
If the system will not be replaced when it wearsout, then
#DIV/0!
should be chosen, because it has the more
positive NPV.
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Chapter 10Question 21
Input area:
System A:
NPV #DIV/0!
Operating life 0
System B:
NPV #DIV/0!
Operating life -
Discount rate 0%
Output area:
System A:EAC #DIV/0!
System B:
EAC #DIV/0!
If the system is replaced, #DIV/0!
should be chosen because it has the
lower EAC.
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Chapter 10Question 25
Input area:
Year 1 unit sales
Year 2 unit sales
Year 3 unit sales
Year 4 unit sales
Year 5 unit sales
Initial NWC
Additional NWC/year
Fixed costs
Variable cost per unit
Unit price
Equipment cost
Salvage value (% of price)
Tax rate
Required return
MACRS - Year 1
MACRS - Year 2
MACRS - Year 3
MACRS - Year 4
MACRS - Year 5
Output area:
Year 0 1
Ending book value -$
Sales -$
Variable costs -
Fixed costs -
Depreciation -
EBIT -
Taxes -
Net income -
Depreciation -
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Operating cash flow -$
Net cash flows
Operating cash flow -$ -$
Change in NWC - -
Capital spending - -Total cash flow -$ -$
Net present value -$
Internal rate of return #NUM!
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2 3 4 5
-$ -$ -$ -$
-$ -$ -$ -$
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
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-$ -$ -$ -$
-$ -$ -$ -$
- - - -
- - - --$ -$ -$ -$
