Author Question: Meals on Wings Inc., which supplies prepared meals for corporate aircraft, needs to purchase new ... (Read 57 times)

big1devin · **on:** Apr 25, 2021

Meals on Wings Inc., which supplies prepared meals for corporate aircraft, needs to purchase new broilers. The new broilers would replace broilers purchased 10 years ago for $105,000, which are being depreciated on a straight-line basis to a zero salvage value (15-year depreciable life). The old broilers can be sold today for $63,000. The new broilers will cost $202,000, installed (not counting funds already spent), and will be depreciated using straight-line depreciation over their 5-year life. They will be sold at their book value at the end of the 5th year. The firm expects to increase its revenues by $27,000 per year if the new broilers are purchased, but cash expenses will also increase by $3,000 per year. Annual interest expense will be $2,000, and net working capital will increase by $5,000. The new broilers will occupy space currently leased to another firm for $530 per month, and $5,000 has already been spent preparing the building for new broilers. The firm's tax rate is 40%. What is the cash flow from the replacement project for Year 1? Round your answers to the nearest dollar.
◦ $27,760
◦ $27,442
◦ $23,944
◦ $22,744
◦ $17,640

pangili4 · **Reply #1 on:** Apr 25, 2021

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