A firm has invested $700 in a new machine that is expected to last for the next 4 years. The machine will be depreciated on a straight line basis down to zero by the end of its 4 year life. The firm projects that the machine will generate consecutive annual cash inflows of $700 beginning in one year and will generate consecutive annual cash outflows at 290 also beginning in one year.. Assuming the tax rate of 33%, determine the firm's cash flow next year. Place your answer to dollars and cents. Do not include a dollar sign or a comma in your answer.

A firm has invested $700 in a new machine that is expected to last for the next 4 years. The machine will be depreciated on a straight line basis down to zero by the end of its 4 year life. The firm projects that the machine will generate consecutive annual cash inflows of $700 beginning in one year and will generate consecutive annual cash outflows at 290 also beginning in one year.. Assuming the tax rate of 33%, determine the firm's cash flow next year. Place your answer to dollars and cents. Do not include a dollar sign or a comma in your answer.

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

Baghiben
Laurel’s Lawn Care Limited has a new mower line that can generate revenues of $120,000 per year. Direct production costs are $40,000, and the fixed costs of maintaining the lawn mower factory are $15,000 a year. The factory originally cost $1 million and is being depreciated for tax purposes over 25 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 25%.
Novel Industries purchases a 41.2 million cyclo-converter. The cyclo-converter will be depreciated by 10.30 million per year over 4 years, starting this year. Suppose Nokela's tax rate is 40%. a) a. What impact will the cost of the purchase have on earnings for each of the next 4 years? b) What impact will the cost of the purchase have on the firm's cash flow for the next 4 years?
A new machine costing $150,000 is expected to save the McKaig Brick Company $11,000 per year for 5 years before depreciation and taxes. The machine will be depreciated on a straight-line basis for a 5-year period to an estimated salvage value of $0. The firm’s marginal tax rate is 40 percent. What are the annual net cash flows associated with the purchase of this machine? Round your answer to the nearest dollar. $ Compute the net investment (NINV) for this project. Round your answer to the nearest dollar. $
As a member of UA Corporation's financial staff, you must estimate the Year 1 cash flow for a proposed project with the following data. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues, each year $45,500 Other operating costs $22,522 Interest expense $4,000 Tax rate 25.0%
XYZ Co is considering to purchase equipment that has 6 years of life and requires an initial capital outlay of $60 million. The equipment will be depreciated using straight line method to zero book value in 6 years. The salvage value of the equipment is expected to be $10 million in six years. The equipment is expected to increase revenue by $25 million and increase expenses by $8 million each year over the next six years. XYZ has an income tax rate of 20%, and a cost of capital of 12%. 5 1. Determine the initial cash flow of the investment at time 0, operating cash flow each year for the next 5 years, and the terminal cash flow of the investment in year 6. 2. Determine the net present value and internal rate of return of the investment. Should the investment be taken? 3. Copy and past your work done for this problem above to the right. Use Excel Goal Seek to find the cost of capital that results in a net present value of $5 million. (You should have the results of both 2. and 3. shown…
A retailer is looking to expand operations at all of their stores for an initial investment of $600. This investment will be depreciated on a straight line basis over the project's 8 year life. The expansion is expected to produce annual cash inflows of $610 in consecutive years over the life of the project beginning one year from today, while also producing annual cash outflows of $310 in consecutive years over the life of the project, also beginning one year from today. What is the project's NPV if the corporate tax rate is 38% and the project's required rate of return is 14%? $391.22 $1116.00 $1595.04 $1.56 $395.04
Suppose an asset has a purchase cost of $15,000, a life of five years, a salvage value of $3,000 at the end of five years, and a net annual before-tax revenue of $7,500. The firm's marginal tax rate is 35%. The asset will be depreciated by five-year MACRS.(a) Determine the cash flow after taxes, assuming that the purchase cost will be entirely financed by the equity funds.(b) Rework part (a), assuming that the entire investment would be financed by a bank loan at an interest rate of 9%.(c) Given a choice between paying the purchase cost up front from the firm's equity and using the financing method of part (b), show calculations to justify which is the better choice at an interest rate of 9%.
A project requires an initial investment in equipment and machinery of $10 million. The equipment is expected to have a 5-year lifetime with no salvage value and will be depreciated on a straight-line basis. The project is expected to generate revenues of $5.1 million each year for the 5 years and have operating expenses (not including depreciation) amounting to 1/3 of revenues. The tax rate is 40%. What is the net cash flow in year 1? Group of answer choices 3.40M 2.84M 0.84M 2.04M
A machine that costs $8,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $1,554 per year before taxes and depreciation. The company depreciates its assets on a straight-line basis and has a marginal tax rate of 35 percent. What is the internal rate of return on this investment?
National Integrated Systems (NIS), a global provider of heating and air conditioning is planning a project whose data is provided below. The project’s equipment has a 3 year tax life after which its salvage value will be zero. The machinery will be depreciated on a straight line basis over three years. Revenues and other operating costs are expected to be constant over the project’s life. What is the project’s cash flow in Year 1? Equipment Cost = $130,000Depreciation rate = 33.33%Annual Sales Revenue= $120,000Operating Costs (ex Depreciation) = $50,000 Tax Rate = 35%
Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $135,000 per year. Direct production costs are $45,000, and the fixed costs of maintaining the lawn mower factory are $17,500 a year. The factory originally cost $0.90 million and is being depreciated for tax purposes over 20 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 25%.