Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Modern Systems, I

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Below is a list of aspects of various capital expenditure
proposals that the capital budgeting team of Modern Systems, Inc.,
has incorporated into its net present value analyses during the
past year. Unless otherwise noted, the items listed are unrelated
to each other. All situations assume a 30% income tax rate and a
10% minimum desired rate of return.
1. Pre-tax savings of $5,000 in cash expenses will occur in each of
the next three years.
2. A machine is purchased now for $82,000.
3. Special tools costing $60,000 will be depreciated $12,000,
$24,000, and $24,000, respectively, on the tax return over a
three-year life.
4. A patent purchased for $363,000 will be amortized on a
straight-line basis over 15 years on the tax return. No salvage
value is expected.
5. Pre-tax savings of $8,000 in cash expenses will occur in each of
the next seven years.
6. Pre-tax savings of $10,500 in cash expenses will occur in the
first, fourth, and seventh years from now.
7. The special tools described in aspect 3 will be sold after three
years for $15,000 cash.
8. A truck with a tax book value of $7,700 after two years will be
sold at that time for $4,600.

a. Calculate and record in column A the related after-tax cash flow
effect(s).

b. Indicate in column B the timing of each cash flow shown in
column A. Use 0 to indicate immediately and 1, 2, 3, 4, and so on
for each year involved.

The answer to investment aspect 1 is presented as an example.

Use negative signs with answers that are cash
outflows.
Under Column B, select the appropriate year for the timing of each
cash flow using the drop down menu.
1
1
2
3
2
3
4
5
6
7
8