6c. A large profitable corporation is considering a capital investment of $50.000. The equipment has a projected salvage value of $0 at the end of thetwo-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is10%.The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance thebalance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below).PaymentBoYEoYYear Balance1 $30,000.00 $16,134.15TotalInterestBalancePrincipal$1,500.00 $14,634.15 $15,365.8516,134.1532,268.2915,365.85768.2915,365.8530,000.000.002,268.29Determine the tax for Year 2 (only - not the total).

Tax for year 2 will be calculated on net income. Tax for year 2 =(Annual gross…

6c A large profitable corporation is considering a capital investment of $50.000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually, The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 0%. he corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the alance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment EoY Balance BoY Year Balance Total Interest Principal 1 $30,000.00 $16,134.15 $1,500.00 $14,634.15 $15,365.85 15,365.85 16,134.15 768.29 15,365.85 0.00 32,268.29 2,268.29 30,000.00

6c A large profitable corporation is considering a capital investment of $50.000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually, The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 0%. he corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the alance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment EoY Balance BoY Year Balance Total Interest Principal 1 $30,000.00 $16,134.15 $1,500.00 $14,634.15 $15,365.85 15,365.85 16,134.15 768.29 15,365.85 0.00 32,268.29 2,268.29 30,000.00

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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Ruby's Corporation is considering two mutually exclusive projects with useful life of 4 years. The after-tax cash flows for projects Q and P are listed below. Table 2 Year Cash Flow Q (RM) (60,000) 30,000 20,000 20,000 10,000 Cash Flow P (RM) (70,000) 10,000 20,000 30,000 40,000 1 2 4 Assuming the expected rate of return on the investment is estimated at 10%. Required to: a. calculate the payback period for each project. b. calculate the net present value for each project. С. based on the two investment techniques, which project should be accepted?
Provide correct answer
Sb. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000O and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10% Determine the taxable income for Year 2 (only - not a total). Edit Format Table
(c) Company X plans to purchase a methanol plant for $1 million. The plant is expected to generate $200,000 in total annual revenue at the end of its first year of operations, after which revenues are expected to grow by 2% per year as operations become more efficient. If the opportunity cost of capital in the market is 5%, determine: i. the net present value of this investment if the plant is expected to remain open forever. ii. if this company should purchase this plant. Give a reason for your answer
Please answer fast i give you upvote
48) Management expects a project to generate EBIT of $600,000 per year for 4 years.Depreciation expense is expected to be $225,000 per year and the corporation’s tax rateis 40%. The project will require an increase in net working capital of $50,000 in yearone and allow a decrease in net working capital of $25,000 in year four. The capitalexpenditure for the project will occur in year zero. What is the free cash flow for theproject in year one?
11
ABC is considering investing in two machines; Machine A and Machine B with initial investments of $4,000,000 and $5,000,000 respectively. Each project is expected to have a life of five (5) years. The after tax profits generated by the projects are as follows: Machine A Machine B After tax profits $ $ Year 1 1 000 000 1 400 000 Year 2 1 200 000 1 500 000 Year 3 1 300 000 1 600 000 Year 4 1 200 000 1 400 000 Year 5 1 000 000 1 200 000 Required: Calculate the average profit for each project.
Sa. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the before-tax CF for Year 2 (only – not a total).
3.) A project is estimated to cost $350,000, last 9 years, and have a salvage value of $90,000. The annual gross income is expected to average $54,000 and annual expenses excluding depreciation is $8,000. If capital is earning 15% before income taxes, determine if this is desirable investment using both PW and AW.
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:
Problem 1 The Bird Co. is considering a 7-year project that would require a cash outlay of $160,000 for machinery and an additional $25,000 for working capital that would be released at the end of the project. The equipment would be depreciated evenly over the 7 years and have a salvage value of $10,000 at the end of 7 years. The project would generate before tax annual cash inflows of $50,000. The tax rate is 21% and the company's discount rate is 14%. What is the annual accounting income? What is the annual after-tax cash flow? What is the payback based upon the initial cash outflows? What is the discounted payback based upon the initial cash outflows?

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