12-9) The company is considering a plan to produce plastic containers. The required initial capital will be 500,000 monetary units. The scrap value of the plan is 50,000 monetary units, with a useful life of 10 years. The pre-tax financial process (CFBT) is 200,000 currency units in the first year and decreases to 10,000 currency units each year if the tax rate is assumed to be 30% and MARR = 10%: A) Calculate the rate of return on capital by the method of summing the figures of years. B) What is the amount of tax savings in the method of summing the figures of years? C) If the depreciation method assumes a declining inventory method with an appropriate depreciation rate (so that the carrying amount of the book value in the last year is equal to the write-off value), what will be the amount of tax savings. D) Which method of depreciation, the method of summing the years or the method of declining inventory is more economical?
12-9) The company is considering a plan to produce plastic containers. The required initial capital will be 500,000 monetary units. The scrap value of the plan is 50,000 monetary units, with a useful life of 10 years. The pre-tax financial process (CFBT) is 200,000 currency units in the first year and decreases to 10,000 currency units each year if the tax rate is assumed to be 30% and MARR = 10%: A) Calculate the rate of return on capital by the method of summing the figures of years. B) What is the amount of tax savings in the method of summing the figures of years? C) If the depreciation method assumes a declining inventory method with an appropriate depreciation rate (so that the carrying amount of the book value in the last year is equal to the write-off value), what will be the amount of tax savings. D) Which method of depreciation, the method of summing the years or the method of declining inventory is more economical?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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12-9) please solve D
Transcribed Image Text:12-9) The company is considering a plan to produce plastic containers.
The required initial capital will be 500,000 monetary units. The scrap value
of the plan is 50,000 monetary units, with a useful life of 10 years. The
pre-tax financial process (CFBT) is 200,000 currency units in the first year
and decreases to 10,000 currency units each year if the tax rate is
assumed to be 30% and MARR = 10%:
A) Calculate the rate of return on capital by the method of summing the
figures of years.
B) What is the amount of tax savings in the method of summing the
figures of years?
C) If the depreciation method assumes a declining inventory method with
an appropriate depreciation rate (so that the carrying amount of the book
value in the last year is equal to the write-off value), what will be the
amount of tax savings.
D) Which method of depreciation, the method of summing the years or
the method of declining inventory is more economical?
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