Please need help with this accounting question A project will increase sales by $300,000and cash expenses by $55,000. The projectwill cost $500,000 and be depreciated usingthe straight-line method to a zero bookvalue over the 5-year life of the project. Thecompany has a marginal tax rate of 40%.What is the yearly value of the depreciationtax shield?

Step 1: Define Tax ShieldA tax shield is a reduction obtained from the taxable income because of…

Answered: A project will increase sales by…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 13P

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a project will increase sales by $92,800 and cash expenses by $53,200. The project will cost $89,000 and be depreciated using straight-line depreciation to a book value of zero over the 4-year life of the project. The tax rate is 35 percent. what is the operating cash flow (OCF) of the project using the tax shield approach? A) $35,170.50 B)$28,650.00 C)$42,350.50 D)$37,672.50 E)$33,527.50
Apex Digital Innovations is planning a project that will increase sales by $350,000 and cash expenses by $95,000. The project will cost $720,000 and will be depreciated using the straight- line method to a zero book value over the 8-year life of the project. The company's marginal tax rate is 30%. What is the yearly value of the depreciation tax shield?
Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 4-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 4 years. Revenues and other operating costs are expected to be constant over the project's 4-year life. What is the project's Year 1 cash flow? Equipment cost (depreciable basis) Straight-line depreciation rate Sales revenues, each year Operating costs (excl. deprec.) Tax rate a. $27,500 b. $28,438 c. $22,750 d. $30,333 e. $21,000 $65,000 25.00% $60,000 $25,000 40.0%
Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will have zero book value, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 4-year life. What is the project's Year 4 cash flow? $65,000 Equipment cost (depreciable basis) Straight-line depreciation rate Sales revenues, each year Operating costs (excl. deprec.) Tax rate a. $27,500 b. $28,438 c. $22,750 d. $21,000 e. $30,333 33.33% $60,000 $25,000 35.0%
A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and will be depreciated using straight- line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? O $9,350 O $9,700 O $8,650 O $5,850
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A project requires purchase of machinery for $150,000. The project generates an annual after-tax operating income of $10,000. The machine's expected useful life is 8 years with no salvage value at the end of its useful life. The required return for the project is 10%. The CCA rate for the machines is 20%. The company's marginal income tax rate is 40%. What is the PV of after-tax cash flows?
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A two-year project has sales of $582,960, cash costs of $411,015, and depreciation expense of $68,109. The tax rate is 24 percent and the discount rate is 12 percent. What is the amount of the annual depreciation tax shield? O $23,606.67 O $16,346.16 O $47,213.34 O $26,210.01 A Moving to another question will save this response. Question 12 of 30

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