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 is the initial cash flow for the project?
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% |
◦ -$110,000
◦ -$105,000
◦ -$103,050
◦ -$101,750
◦ -$98,250
Hong Kong is a strange situation. A British colony since 1842, it was handed back to China in 1997 a
A typical hand-operated vacuum pump.
One-handed kneading. Tissues are lifted with the whole hand in firm contact.
Apply thumb strokes to the back of the hand (knuckle to wrist).
The hand on the right exhibits the orange-tinged skin characteristic of carotenodermia
muscles of the hand