7) EmKay, Inc. is considering an investment in a new production equipment to boost its revenue. For this new investment, the following data apply: Purchase price = $900,000 $360,000 from company funds and $540,000 from a loan} Useful Life: 4 years Depreciation: MACRS-GDS 3-year property Effective tax rate: 35% Estimated salvage: $90,000 Estimated annual O&M costs: $48,000 Estimated new annual revenue: $360,000 Conditions on loan: Nominal annual rate of 5% per year compounded annually. The loan is to be repaid over 3 years with equal annual payments. a) Loan calculations - principal and interest payments. (Round off values to the nearest dollar) b)' O EOY BT&LCF Loan 1 2 3 Find the ATCF for each year of this investment (Round off values to the nearest dollar). 4 Loan Interest Principal Payment Payment MACRS- GDS Deduction Taxable Income Tax ATCF
7) EmKay, Inc. is considering an investment in a new production equipment to boost its revenue. For this new investment, the following data apply: Purchase price = $900,000 $360,000 from company funds and $540,000 from a loan} Useful Life: 4 years Depreciation: MACRS-GDS 3-year property Effective tax rate: 35% Estimated salvage: $90,000 Estimated annual O&M costs: $48,000 Estimated new annual revenue: $360,000 Conditions on loan: Nominal annual rate of 5% per year compounded annually. The loan is to be repaid over 3 years with equal annual payments. a) Loan calculations - principal and interest payments. (Round off values to the nearest dollar) b)' O EOY BT&LCF Loan 1 2 3 Find the ATCF for each year of this investment (Round off values to the nearest dollar). 4 Loan Interest Principal Payment Payment MACRS- GDS Deduction Taxable Income Tax ATCF
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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Transcribed Image Text:7)
, Emkay, Inc. is considering an investment in a new production equipment to boost its revenue.
For this new investment, the following data apply:
Purchase price = $900,000 $360,000 from company funds and $540,000 from a loan}
Useful Life: 4 years
Depreciation: MACRS-GDS 3-year property
Effective tax rate: 35%
Estimated salvage: $90,000
Estimated annual O&M costs: $48,000
Estimated new annual revenue: $360,000
Conditions on loan: Nominal annual rate of 5% per year compounded annually. The loan is to be repaid over
3 years with equal annual payments.
3
a)
Loan calculations - principal and interest payments. (Round off values to the nearest dollar)
b)'
EOY BT&LCF
0
2
Find the ATCF for each year of this investment (Round off values to the nearest dollar).
MACRS-
GDS
Deduction
3
Loan
Loan
Interest
Principal
Payment Payment
Taxable
Income
Tax
ATCF
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