A company which started its operation in the year 8. The pannel set the MARR at 10% after-tax. CCA rate = 20% FOR EQUIPTMENT. a) What is the remaining Undepreciated Capital cost at the end of year 20 12? b) What is the equivalent annual worth of the tax savings associated with these transactions if the corporate tax rate is 40%?

A company which started its operation in the year 8. The pannel set the MARR at 10% after-tax. CCA rate = 20% FOR EQUIPTMENT. a) What is the remaining Undepreciated Capital cost at the end of year 20 12? b) What is the equivalent annual worth of the tax savings associated with these transactions if the corporate tax rate is 40%?

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

PI Equity (PIE) invested in a biotech company (BIO) with $5 million of EBITDA. PIE paid $35 million with 30% financed at a rate of 6% over three years. Assume BIO's EBITDA grows by 10% each year and they exit after three years at a multiple of 12 times EBITDA. What is the return on invested assets, without regard to any tax benefits attributable to interest or amortization? O 2.8x. O 3.5x. 3.7x. O 4.0x.
4. Binford Tools has an expected perpetual EBITDA equal to $67k. Its tax rate is 35%. Binford has $139k in debt at a cost of 6.85%. The unlevered capital cost is 10.25%. What is Binford's total value assuming interest is tax deductible?
PMF, Inc., can deduct interest expenses next year up to 30% of EBIT. This limit is equally likely to be $20 million, $28 million, or $36 million. Its corporate tax rate is 38%, and investors pay a 30% tax rate on income from equity and a 35% tax rate on interest income. a. What is the effective tax advantage of debt if PMF has interest expenses of $16 million this coming year? b. What is the effective tax advantage of debt for interest expenses in excess of $36 million? (Ignore carryforwards). c. What is the expected effective tax advantage of debt for interest expenses between $20 million and $28 million? (Ignore carryforwards). d. What level of interest expense provides PMF with the greatest tax benefit?
H3. Please show proper step by step calculation
Genie Company has operating income after taxes of P50,000. It has P200,000 of equity capital, which has an after-tax weighted-average cost of 12%. Genie also has P10,000 of current liabilities (noninterest-bearing) and no long-term liabilities. What is the company's economic value added (EVA) for the period?
Pertinent information for two alternatives A and B is shown below. If i=10 % / year and the effective income tax rate is 35%, answer the following true/false questions. Alt. A Alt.B 150,000 225,000 100,000 100,000 30,000 10,000 15,000 22,500 ADS-6: Years Recovery Period GDS: 5-Years Recovery Period Basis, $ Gross Income (Gl), $ Operating Expense (OE), $ Salvage Value, $ MARCS Depreciation Method The CFAT at the end of year 7 for Alt. A is less than $50,000. True O False
Tom Inc. report a $30million of net income. its EBIT is 50millions, the flat tax rate is 25%? What was its interest expense (in million)?
An individual actually earned a 4% nominal return last year. Prices went up by 3% over the year. Given that the investment income was subject to a federal tax rate of 28% and a state and local tax rate of 6%, what was the investor's actual real after-tax rate of return? A. -0.36% B. 0.66% C. 1.45% D. 0.72%
3. (a) Debt is 20% of assets for an organization. Total assets are$10,000. The tax rate is 40%. The interest rate is 10%. EBIT profit is$1000. What is the after taxes and interest profit? What is the ROE?Profit_______________ROE________________(b) If in 1(a) debt is increased to 50% of assets, what will be the aftertaxes and interest profit and the ROE?Profit__________________ROE___________________
2. An overview of a firm's cost of debt To calculate the after-tax cost of debt, multiply the before-tax cost of debt by (1-T). Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 11.10% for a period of six years. Its marginal federal-plus-state tax rate is 25%. WGC's after-tax cost of debt is 8.32% (rounded to two decimal places). At the present time, Western Gas & Electric Company (WGC) has 10-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,495.56 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 2.94% 2.35% 2.65% 3.38%
An investment of $1,000 earns annual interest of 5% (no capital gains). Assuming accrual taxes of 30%, the expected after-tax value of the investment in ten years is closest to: In Question 1, the tax drag in percentage terms is closest to:
Suppose a firm's tax rate is 25%. a. What effect would a $9.05 million operating expense have on this year's earnings? What effect would it have on next year's earnings? b. What effect would a $10.2 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.04 million per year for five years? What effect would it have on next year's earnings? a. What effect would a $9.05 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. A $9.05 million operating expense would be immediately expensed, increasing operating expenses by $9.05 million. This would lead to a reduction in taxes of 25% x $9.05 million = $2.26 million. B. A $9.05 million operating expense would be immediately expensed, increasing operating expenses by $9.05 million. This would lead to an increase in taxes of 25% × $9.05 million = $2.26 million. C. Earnings would decline by $9.05…