Before-Tax-and-Loan Cash Flow ,PPMT Principal payment, IPMT (interest payment fo

Question

Before-Tax-and-Loan Cash Flow ,PPMT Principal payment, IPMT (interest payment for a given period), TI (taxable income), ATCF(After tax cash flow), BV (Book value),

1. (20 points) A company invested in a Flexible Manufacturing System for $700,000. The installation costs incurred were S125,000. The equipment has a MACRS-GDS 5-year property class. The BT&LCF; generated is $250,000 per year, and the company's tax rate is 40%. The company obtained a loan to finance 50% of the total investment equipment at 10% to be paid in 4 equal total payments. It is anticipated that the equipment will be used only for 4 years and sold at the end of year 4 for S200,000. Fill the following ATCF table for year 4. EOY BT&LCF; Salvage PPMT IPMT DWO TI TATCF BV 4

Explanation / Answer

20% 825000 165000 32% 825000 264000 19.20% 825000 158400 11.52% 825000 95040 11.52% 825000 95040 5.76% 825000 47520 Book value at the end of year 4 142560 EOY BT&LCF salvage total cash inflow ppmt interst after interest   cash flow Depreciation Taxable income tax 40% ATCF Book value 4 250000 200000 450000 103125 10312.5 336562.5 95040 241522.5 96609 144913.5 142560

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