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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
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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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 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance 1 $30,000.00 $16,134.15 Total Interest Balance Principal $1,500.00 $14,634.15 $15,365.85 16,134.15 32,268.29 15,365.85 768.29 15,365.85 30,000.00 0.00 2,268.29 Determine the tax for Year 2 (only - not the total).
Transcribed Image Text: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 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance 1 $30,000.00 $16,134.15 Total Interest Balance Principal $1,500.00 $14,634.15 $15,365.85 16,134.15 32,268.29 15,365.85 768.29 15,365.85 30,000.00 0.00 2,268.29 Determine the tax for Year 2 (only - not the total).
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