can you solve this without using excel? thanks. NO EXCEL please. A firm purchase

Question

can you solve this without using excel? thanks. NO EXCEL please.

A firm purchases a depreciable asset at year 0 at price $148, which it uses for operations during the asset's useful life of 6 years, and the asset is depreciated according to a double-declining balance depreciation. At the end of the year 6 the firm sells the asset at price $74; the operation profit for the year 6 is $13; the firm incomes are taxed at the 28% tax rate. Calculate the present value of year 6 cash flow (after-tax. including operations and sale), if inflation is 1.4% and real interest rate is 4%. (Provide your answer with $0.1 precision.)

Explanation / Answer

Staraight line rate of depreciatio for 6 years = 100/6 = 16.67 % Double declining rate = 16.67%*2 = 33.34% year beginning book value Depreciation @ 33.44% Closing value 1 148 49.4912                 98.51 2 98.5088 32.94134272                 65.57 3 65.56745728 21.92575771                 43.64 4 43.64169957 14.59378433                 29.05 5 29.04791523 9.713622853                 19.33 6 19.33429238 6.465387371                 12.87 Sale price = 74 at the end of 6 years Profit on sale = 74-12.87 = 61.13 Operating profit = 13 Tax for 6 year = (61.13+13)*28% = 20.7564 Cash flow for year 6 = 74+13-20.7564 = 66.2436 Discount Rate = 4%* (1+0.014)^6 = 4.35% Discounted Cashflow = 66.2436/(1.0435)^6 = 51.31

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