Duddy Kravitz owns the Saint Viateur Bagel store. His world famous bagels are hand rolled, boiled in honey-water and baked in a wood-burning oven. The store sells 5,000 bagels per day and is open 365 days of the year. The bagels are so popular that, on weekends, the customer line-up runs half-way down the block. Uncle Benjy thinks that the wood-fired oven should be replaced by a modern gas oven, which would reduce costs by $0.02 per bagel. A new oven would cost $105,000. Duddy is considering Uncle Benjy's idea, but he only plans to be in business for another two years. The bagels are sold for $0.75 each. The cost of producing each bagel with the wood-burning oven is $0.50 which includes labour and raw materials. The current oven was purchased thirty years ago for $20,000. It could be sold today for $5,000 and will be worth $3,000 in two years. A new oven costs $105,000 today and could be sold for $55,000 in two years. Duddy's cost of capital is 9%. Assume that investment cash flows occur immediately, and that sales and production costs occur at the end of the year. Assume that both ovens are classified as 10-year property and depreciated using the MACRS system. The tax rate is 35%. What are the terminal year cash flows?
MACRS Depreciation Rates
| Year | 5-Year | 7-Year | 10-Year |
| 1 | 20.00% | 14.29% | 10.00% |
| 2 | 32.00% | 24.49% | 18.00% |
| 3 | 19.20% | 17.49% | 14.40% |
| 4 | 11.52% | 12.49% | 11.52% |
| 5 | 11.52% | 8.93% | 9.22% |
◦ $30,340
◦ $36,500
◦ $62,260
◦ $90,600
◦ $94,500
Palpating the Hand Joints, Metacarpophalangeal Joint
The recent mass upheavals in Tunisia, Egypt, Libya, Yemen, and Syria gave political scientists a cha
In this 1900 cartoon, oil baron John D. Rockefeller holds the White House in the palm of his hand wh
The Distribution of the World's Land and Population
Apply deep circular effleurage to the buttocks muscles as a warming technique. Place one hand on top ...
Apply light effleurage around abdomen in a large circle with the palm of a flat hand.