4. Michael Joe borrowed P15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end-of-year payments. a. Calculate the annual end-of-year loan payment. (show your solution) b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments. 5. Attaway General, Inc., is considering replacing its existing computer system, which was purchased 2 years ago at a cost of P325,000. The system can be sold today for P200,000. it is being depreciated using MACRS and a 5-year recovery period. A new computer system will cost P500,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a 40% tax rate on ordinary income and capital gains. a. Calculate the initial investment associated with the replacement project. 6. A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is P1.9 million plus P100,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period. Additional sales revenue from the renewal should amount to P1.2 million per year, and additional operating expenses and other costs (excluding depreciation) amount to 40% of the additional sales. The firm has an ordinary tax rate of 40%. (Note: Answer the following questions for each of the next 3 years only.) a. What incremental operating cash inflows will result from the renewal?
4. Michael Joe borrowed P15,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized into three equal annual end-of-year payments. a. Calculate the annual end-of-year loan payment. (show your solution) b. Prepare a loan amortization schedule showing the interest and principal breakdown of each of the three loan payments. 5. Attaway General, Inc., is considering replacing its existing computer system, which was purchased 2 years ago at a cost of P325,000. The system can be sold today for P200,000. it is being depreciated using MACRS and a 5-year recovery period. A new computer system will cost P500,000 to purchase and install. Replacement of the computer system would not involve any change in net working capital. Assume a 40% tax rate on ordinary income and capital gains. a. Calculate the initial investment associated with the replacement project. 6. A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is P1.9 million plus P100,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period. Additional sales revenue from the renewal should amount to P1.2 million per year, and additional operating expenses and other costs (excluding depreciation) amount to 40% of the additional sales. The firm has an ordinary tax rate of 40%. (Note: Answer the following questions for each of the next 3 years only.) a. What incremental operating cash inflows will result from the renewal?
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
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Transcribed Image Text:4. Michael Joe borrowed P15,000 at a 14% annual rate of interest to be repaid over 3
years. The loan is amortized into three equal annual end-of-year payments.
a. Calculate the annual end-of-year loan payment. (show your solution)
b. Prepare a loan amortization schedule showing the interest and principal
breakdown of each of the three loan payments.
5. Attaway General, Inc., is considering replacing its existing computer system, which was
purchased 2 years ago at a cost of P325,000. The system can be sold today for P200,000.
It is being depreciated using MACRS and a 5-year recovery period. A new computer
system will cost P500,000 to purchase and install. Replacement of the computer system
would not involve any change in net working capital. Assume a 40% tax rate on ordinary
income and capital gains.
a. Calculate the initial investment associated with the replacement project.
6. A firm is considering renewing its equipment to meet increased demand for its product.
The cost of equipment modifications is P1.9 million plus P100,000 in installation costs. The
firm will depreciate the equipment modifications under MACRS, using a 5-year recovery
period. Additional sales revenue from the renewal should amount to P1.2 million per year,
and additional operating expenses and other costs (excluding depreciation) amount to 40%
of the additional sales. The firm has an ordinary tax rate of 40%. (Note: Answer the following
questions for each of the next 3 years only.)
a. What incremental operating cash inflows will result from the renewal?
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