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
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
Consider an asset that costs $311,000 and is depreciated straight-line to zero over its six-year tax life. The asset is to be used in a four-year project; at the end of the project, the asset can be sold for $58,000. If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset? Can the calculator and excel solution be provided?
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 3-year project requires the purchase of a machine (fixed asset) for $6,000 in Year 0. In Year 2, the project is expected to have net income of $2,000 and the depreciation rate is 45%. The tax rate is 35%. There is no interest expense. What is the Operating Cash Flow in Year 2? Enter your answer without the dollar sign and round your final answer to the nearest whole number (nearest dollar).
Consider an asset that costs $176,000 and is depreciated straight-line to zero over its 10- year tax life. The asset is to be used in a 4-year project; at the end of the project, the asset can be sold for $22,000. If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset?
A project requires initial asset investment of $1 million. The asset will last for 8 years, and will be depreciated for tax purposes at the CCA rate of 30%. The required return on this project is 16%, and the marginal corporate tax rate is 36%. Assuming that the asset will have a salvage value of $50,000 at the end of Year 8. what is the present value of the CCA tax shields from this project? Multiple Choice 204111.57 $215.009.97 $218.59071 $234.782.61
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A 9-year project is expected to provide annual sales of $225,000 with costs of $98,000. The equipment necessary for the project will cost $365,000 and will be depreciated on a straight- line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst- case scenario? Multiple Choice $111,802 $56,820 $79,942 $54,102 $83,330
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Bha

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