8) The Shell Corp. owns a piece of petroleum drilling equipment that costs &100,000 and will be depreciated by Straight-line depreciation with B=$100,000, N=5 years, S=$0. There is a combined 40% tax rate. Shell will lease the equipment to others each year and receive $50,000 per year. At the end of 3 years, the firm will sell the equipment for $20,000. If the firm requires a 10% after-tax rate of return, what is the PW of the investment?

Q: 2. Nova Corp. is considering the purchase of a $300,000 machine that has a 5 year life with no…

A: A) NPV of Buying the MachineCalculate the After-Tax Cost of the MachineThe machine costs $300,000…

Q: The Wet Corporation has an investment project that will reduce expenses by $30,000 per year for 3…

A: Depreciation year 1= Depreciation rate * Project cost= 0.3333 * 35,000= 11665.50

Q: For the purpose of performing capital budgeting analysis, we need to look at incremental cash flows…

A: In capital budgeting analysis, businesses evaluate potential investment opportunities to determine…

Q: nvestment d on a 5-ye R of 5%, cc sh flow un The invest

A: Retained earnings refer to the sum value of profits or earnings remained at a company after it has…

Q: Your company is considering a new project that will require $100,000 of new equipment at the start…

A: Npv is a capital budegting techniques which help in decision Making on the basis of future cash…

Q: Brummit Corporation, is evaluating a new 4 year project. The equipment necessary for the project…

A: The projected residual value of an asset at the end of its useful life is referred to as salvage…

Q: A company has purchased a machine (CCA rate 24%) at $221,000 and has a tax rate of 38.00%. By how…

A: NPV is a capital budgeting technique that uses the time value of money to determine the present…

Q: A company is evaluating a new 4-year project. The equipment necessary for the project will cos…

A: Aftertax salvage value refers to the amount of tax to be deducted from the sale price after the life…

Q: Your company is considering a new project that will require $790,000 of new equipment at the start…

A: Depreciation per year = ($790,000 - $255,000) / 5.= $107,000.

Q: Dave's Demolitions Inc. is considering purchasing $697,400 of equipment for a four- year project.…

A: Salvage Value net of tax refers to the sale value of the he equipment or the project after the…

Q: any, whose earnings put them in the 46% tax bracket, is considering purchasing a piece of equipment…

A: Net present value is main capital budgeting method used based on time value of money and it must be…

Q: Winter Tyme, Inc., is considering building a plant to produce snow tires. The project would last 5…

A: Operating cash flow is cash flow available from the main core operating activities after doing…

Q: Umbrella Corp., has a WACC of 10.2% and a tax rate of 26%.  Project Alice requires an upfron cost of…

A: NPV is the present value of cash flows during the term of the project

Q: Longshore Drilling Company (LDC) is a contracting company that lays oil pipeline infrastructure. LDC…

A: Excess Present Value(PV) Index or Profitability Index shows proportion of PV of inflows in relation…

Q: The Scampini Supplies Company recently purchased a newdelivery truck. The new truck costs $22,500,…

A: The formula to compute NPV for an abandonment option as follows:

Q: our facility is undergoing a major expansion, which will require significant capital investment into…

A: Deprecation is that amount which is charged on assets by the company every year the useful life of…

Q: percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company's…

A: Aftertax salvage value refers to the amount of tax to be deducted from the sale price after the life…

Q: a). qw Inc. is considering the purchase of a $116,000 piece of equipment. The equipment is…

A: Cost of equipment = $ 116000 Sale price after 2 years = $ 50000 Tax rate = 35% Book value after 2…

Q: A firm depreciated its assets with regard to an investment to $0.00 book value by the end of the…

A: Here, Scrap Market Value = $1,200,000 Life of the project = 15 years Interest rate = 14% Tax rate =…

Q: Floopy Co has decided to purchase new equipment. They are in the 38% tax bracket.  The desired…

A: ParticularsAmountEquipment cost      77,000Interest12%Tax rate38%Loan payments…

Q: If a chemical olant is paying 43% in income taxes and wants to purchase a ball mill designed to last…

A: Particulars Amount ($) Annual income 24,000 Less: Annual expenditure (13,000) Less:…

Q: A firm depreciated its assets with regard to an investment to $0.00 book value by the end of the…

A: Deprecation is the accounting method under which cost of assets will be claimed as expenses by…

Q: Your facility is undergoing a major expansion, which will require significant capital investment…

A: Cost of the machinery = $7.2 million The accumulated depreciation is

Q: 2 MotoSport is buying an asset that costs $730,000 and can be depreciated at 20 percent per year…

A: When an asset that is being used by a business is sold, a profit or gain is recorded as a business…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.