A company purchases an industrial laser for $166,000. The device has a useful life of 4 years and a salvage value (market value) at the end of those four years of $60,000. The before-tax cash flow is estimated to be $80,000 per year. a. You, of course, suggested applying the 3-year MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of 23%, determine the depreciation schedule and the after tax cash flow. b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $75,000 in year two (consider year two to be the "year 2" row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year? Click the icon to view the GDS Recovery Rates (rg) for the 3-year property class. ..... a. Determine the MACRS depreciation amounts and the after tax cash flow for this laser. Fill in the table below. (Round to the nearest dollar.) ΕΟΥ Depreciation, $ ATCF, $ - 166,000 1

A company purchases an industrial laser for $166,000. The device has a useful life of 4 years and a salvage value (market value) at the end of those four years of $60,000. The before-tax cash flow is estimated to be $80,000 per year. a. You, of course, suggested applying the 3-year MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of 23%, determine the depreciation schedule and the after tax cash flow. b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $75,000 in year two (consider year two to be the "year 2" row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year? Click the icon to view the GDS Recovery Rates (rg) for the 3-year property class. ..... a. Determine the MACRS depreciation amounts and the after tax cash flow for this laser. Fill in the table below. (Round to the nearest dollar.) ΕΟΥ Depreciation, $ ATCF, $ - 166,000 1

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

How do I do number 2 ?
88 MULTIPLE CHOICE Question 6 Listen If f(x)= and g(x) = x²-16, then what is the value of f(g(4))? A 0 B 4 C undefined
Q2) 4. What is sensitivity analysis?
LO 7.4 Name the four main special journals.
it say 1.33 is incorrect
Q4. A) Why is a policy statement important?
Problem 9-25 Fudge factors An oil company executive is considering investing $10.1 million in one or both of two wells: well 1 is expected to produce oil worth $3.01 million a year for 10 years; well 2 is expected to produce $2.01 million for 15 years. These are real (inflation-adjusted) cash flows. The beta for producing wells is 0.91. The market risk premium is 9%, the nominal risk-free interest rate is 7%, and expected inflation is 3%. The two wells are intended to develop a previously discovered oil field. Unfortunately there is still a 21% chance of a dry hole in each case. A dry hole means zero cash flows and a complete loss of the $10.1 million investment. Ignore taxes and make further assumptions as necessary. a. What is the correct real discount rate for cash flows from developed wells? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Real discount rate b. The oil company executive proposes to add 20 percentage points to the…
what is 2 plus eight ?
A. For what values of x is f(x) NOT y 00 6 4 2 X -3-2-10 1 2 3 4 5
Answer Question 4
Q.47 Using the repeatability assumption, what is the PW of Alternative Y? O. $22,436 O. $58,192 O. $7,740 O. $12,385 Q. 48 Using coterminated assumption, what is the FW of Alternative X? O. $12,385 O. $7.740 O. $22,436 O. $58,192 Q. 49 Using the coterminated assumption, what is the FW of Alternative Y? O. $22,436 O. $58,192 O. $12,385 O. $7,740 Q. 50 Which alternative is selected? O. Alternatíve X O. Alternative Y O. neither X nor Y is economically attractive O. X and Y are equally attractive
7. Explain the M&M Proposition I and II using your own words.