1) 1) An asset for petroleum refining was purchased for $720,000, and placed in service by an oil company with the trade in of an old unit with value $10,000. The new asset has an estimated MV (market value) of $150,000 at the end of an estimated useful life of 18 years. It is expected that this asset will bring net annual profit of $90,000. The depreciation is based on the 200% DB method with switchover to SL method. Assuming the Federal corporate income tax rate is 21% and Indiana state's corporate income tax rate is 5.25%. With the switchover method, What is the present worth of the company's after tax return. Please fill in year 3's value in the table below. Hint: you will need to calculate year 1 and 2's value first. BTCF Depreciation ATCF Year Beginning year BVDepreciation DB Depreciation SL Selected 1 3 4
1) 1) An asset for petroleum refining was purchased for $720,000, and placed in service by an oil company with the trade in of an old unit with value $10,000. The new asset has an estimated MV (market value) of $150,000 at the end of an estimated useful life of 18 years. It is expected that this asset will bring net annual profit of $90,000. The depreciation is based on the 200% DB method with switchover to SL method. Assuming the Federal corporate income tax rate is 21% and Indiana state's corporate income tax rate is 5.25%. With the switchover method, What is the present worth of the company's after tax return. Please fill in year 3's value in the table below. Hint: you will need to calculate year 1 and 2's value first. BTCF Depreciation ATCF Year Beginning year BVDepreciation DB Depreciation SL Selected 1 3 4
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:1) 1) An asset for petroleum refining was purchased for $720,000, and placed in service by an oil
company with the trade in of an old unit with value $10,000. The new asset has an estimated MV
(market value) of $150,000 at the end of an estimated useful life of 18 years. It is expected that
this asset will bring net annual profit of $90,000. The depreciation is based on the 200% DB
method with switchover to SL method. Assuming the Federal corporate income tax rate is 21%
and Indiana state's corporate income tax rate is 5.25%. With the switchover method, What is
the present worth of the company's after tax return. Please fill in year 3's value in the table
below.
Hint:
you
will need to calculate year 1 and 2's value first.
BTCF
Depreciation ATCF
Year
Beginning year BVDepreciation DB Depreciation SL Selected
1
B
E
F
4
2.
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