macrs

[theaasch]

KLS, Inc. is considering a four-year project that requires the purchase of $2,435,700 worth of equipment. The
equipment is classified under MACRS as being in the seven-year property class. The company will incur $112,500 in annual interest and taxes at the 34% marginal rate for this project. Sales are estimated at $1.5 million a year with costs averaging $939,500 annually over the life of the project. What are the annual CFs?
Year MACRS Allowance
1 14.29%
2 24.49%
3 17.49%
4 12.49%
5 8.93%
6 8.93%
7 4.45%

[CheekyChops]

Do your own homework.

[Reverandfunk]

Stop being so lazy

[exdonkey]

4

[factor-fiction]

Understood it until the last line. What does CFs stand for?

[factor-fiction]

Got it- Cash Flows.
It seems common sense to me. Draw up a table with columns for year 1, year 2, year 3.... year 7 along the top. Down the side have rows for outlay/depreciation, interest, tax, sales and costs.
Sales- $1.5 million each year
Costs- $939,500 each year
Interest- $112,500 pa
depreciation- year 1 it's 14.29% of $2,435,700 ; then work out year 2 etc (not sure if it's based on full $2435700 each year or on that figure minus previous year's depreciation-look at your notes!)
Surplus before tax each year=sales-(depreciation +costs + interest)
Net cash flow each year=surplus less 34%

Just a common sense calculation from someone who can add up but hasn't studied this.

[theaasch]

CFs stands for cash flow. By the way I dont want you to do the work just point me in the right direction

[theaasch]

Thank you

[factor-fiction]

Forgot to add- it looks as if project is only over 4 years, so you need to think about cash flows are needed over 4 years or 7