Big-Pear Corp. is considering replacing its existing equipment that is used to produce smart cell phones. This existing equipment was purchase 2 years ago at a base price of $48,000. Installation costs at the time for the machine were $7,000. The existing equipment is considered a 5-year class for MACRS. The existing equipment can be sold today for $60,000 and for $30,000 in 4 years. The new equipment has a purchase price of $145,000 and is also considered a 5-year class for MACRS. Installation costs for the new equipment are $8,000. The estimated salvage value of the new equipment in year 4 is $70,000. This new equipment is more efficient than the existing one and thus savings before taxes using the new equipment are $12,000 a year. Due to these savings, inventories will see a one time reduction of $3,000 at the time of replacement. The company's marginal tax rate is 33% and the cost of capital is 12%. For this project, what is the incremental cash flow in year 3

-$7,525.44

Explanation:

MACRS 5 year depreciation

if project is carried out:

initial outlay = {[$60,000 - ($55,000 x 52%)] x (1 - 33%)} - $145,000 - $8,000 + $3,000 = -$128,962

cash flow year 1 = [$12,000 - ($154,000 x 20%)] x 0.67 = -$12,596

cash flow year 2 = [$12,000 - ($154,000 x 32%)] x 0.67 = -$24,977.60

cash flow year 3 = [$12,000 - ($154,000 x 19.2%)] x 0.67 = -$11,770.56

cash flow year 4 = {[$12,000 - ($154,000 x 11.52%)] x 0.67} + {[$70,000 - ($154,000 x 17.28%)] x (1 - 33%)} = -$3,846.34 + $29,070.50 = $25,224.16

if project is not carried out:

cash flow year 1 = -$10,506 x 0.67 = -$7,0752.20

cash flow year 2 = -$6,336 x 0.67 = -$4,245.12

cash flow year 3 = -$6,336 x 0.67 = -$4,245.12

cash flow year 4 = (-$3,168 x 0.67) + ($30,000 x 0.67) = $17,977.44

incremental cash flow year 3 = -$11,770.56 - (-$4,245.12) = -$7,525.44

can your question and add a list so i can you out?

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know