Runkle is considering buying a new helicopter for $350,000

Business Sep 17, 2020

Runkle is considering buying a new helicopter for $350,000. The company's old helicopter has a book value of $85,000, but will only bring $60,000 if it is sold. The old helicopter can be depreciated at the rate of $13,500 per year for the next four years. The new helicopter can be depreciated using the 5 year MARCS schedule. The new helicopter is expected to save $62,000 after taxes through reduced fuel and maintenance expenses. Runkle is in the 34% tax bracket and has a 12% of capital.

a. What is the cash inflow from selling the old helicopter?
b. What is the net cost of the new helicopter?

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