3. Solar Solutions has purchased new manufacturing equipment that cost $400,000. Calculate the yearly taxsavings from the CCA tax shield for the next three years. Assume that the income tax rate is 30%, the CCA rateis 30%, and the weighted-average cost of capital (WACC) is 12%. Assume that CCA in the first year is subject tothe accelerated depreciation method for the year of acquisition. (Hint. Use Microsoft Excel to calculate thediscount factor(s).) (Do not round your intermediate calculations. Round your final answers to 2 decimalplaces.)X Answer is complete but not entirely correct.Year123$$$PV ofTax Savings91,071.43 x56,919.64 X35,574.78 X

Present value describes the money present today is more valuable than the money will receive in the…

Answered: 3. Solar Solutions has purchased new…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation.
As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues, each year $45,500 Other operating costs $22,522 Interest expense $4,000 Tax rate 25.0%
Project the OCFs for the next three years considering incomes of $165k, $170K and $180 respectively, and a depreciation of $15K, $16K and $18K respectively. Consider a tax of 25%. (Use the following format: "$11.111; $11.111; $11.111) Answer. $65.588;$69.325;$76.800 Then, calculate the NPV (of the three years projected, don't include the current one) if your investment is $150K and the cost of opportunity is 10% (use the following format: $11.111) Answer $24.619 Decide if you invest or not in this project (use the following format: "Yes" or "No") Answer NoI need the process please
6) New Brunswick Metalworks is evaluating a $100,000 polishing machine (CCA class 8). Services provided by the machine are expected to bring $15,000 per year in value over the next five years. Operating costs are expected to be $1,000 per year. Calculate the amount of taxes paid in each of the next five years of service life under the corporate tax rate of 40%.
You buy a property for $100,000 in year 0. The building is depreciated using straight-line depreciation over 27.5 year. The NOI is $5,000 in year 1 and grows at 2% thereafter. The building is sold at a the end of year 4 at a terminal cap rate of 6%. Assume an ordinary income tax rate of 35%, a capital gains tax rate of 20%, and a depreciation recapture tax rate of 25%. What is going to be the total tax bill on the sale? O 1,187 O 1,959 O 3,146 O 3,636
Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent. nts Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.) Print Depreciation tax shield eferences 00
Macrohard Software is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, and the allowed depreciation rates for such property are 35 %, 43%, 17%, and 5% for Years 1 through 4. Revenues and other operating costs are expected to be constant over the project's 10-year expected life. Equipment cost (depreciable basis) P78,000 Sales revenues, each year 50,000 Operating costs (excl. depreciation) 25,000 Tax rate 25.0% The following are the questions/requirements for this data set. Fill-up the answers in the next 3 questions: (Round final answers to nearest peso) Year 1 Operating Cash Flow • Year 3 Operating Cash Flow Year 5 Operating Cash Flow
A corporate expects to receive $35,900 each year for 15 years if a particular project is undertaken. There will be an initial investment of $121,595. The expenses associated with the project are expected to be $7,608 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 48% marginal tax rate, MARR of 8%, determine the project's after-tax net present worth.
You are a small business owner and have purchased a $10,000 asset that you can depreciate over four years ($2,500/per year). Under accelerated depreciation, you would be allowed to depreciate 75% of the asset's value immediately in the first year and the remaining 25% in the second year. Assume that the discount rate is 10%. Further suppose that your business usually makes $56,000 of annual profit, on which it pays a 21% tax every year. Should you claim accelerated depreciation, or should you depreciate the asset over the 4 years at $2,500 per year?
A firm has invested $50,000 in equipment with a 5-year useful life. The machinery will have a salvage value of $5,000. The annual benefits from the machinery are $13,000 for the first year and increase by $2,000 per year. Assume a combined 30% income tax rate, and the firm uses the SOYD depreciation. Calculate the before-tax IRR. Calculate the after-tax IRR.
A corporation expects to receive $32,000 each year for 15 years if a particular project is undertaken. There will be an initial investment of $150,000. The expenses associated with the project are expected to be $7500 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 28% marginal tax rate, and determine the project’s after-tax rate of return.
Example: A corporation is contemplating the purchase of some specialized machinery. The machinery will cost $250,000 and will be depreciated over its five year life by using the straight line method. Annual inflows of $300,000 and cash operating expenses of $220,000 are anticipated as a result of this new machinery. The corporation is subject to a 40 percent income tax rate. The payback period on this investment (rounded to the nearest tenth) is:

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