Can you help me solve this general accounting problem using the correct accounting process? A project will increase sales by $500,000 and cashexpenses by $120,000. The project will cost $800,000and be depreciated using the straight-line method to azero book value over the 8-year life of the project. Thecompany has a marginal tax rate of 35%.What is the yearly value of the depreciation tax shield?

Step 1: Define Tax ShieldA tax shield refers to the reduction in taxable income achieved through…

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 $250,000 and cash expenses by $60,000. The project will cost $400,000 and be depreciated using the straight-line method 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 yearly value of the depreciation tax shield? Answer
A project will increase sales by $250,000 and cash expenses by $60,000. The project will cost $400,000 and be depreciated using the straight-line method 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 yearly value of the depreciation tax shield?
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
you are trying to decide whether to accept or reject a one-year project. The project is estimated to generate $5,000 in incremental gross profit, which includes $200 in depreciation. Incremental SG&A expense is $400. At a 35% tax rate,what would be the after-tax incremental cash flow ?
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 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
Shelly's Boutique is evaluating a project which will increase annual sales by $70,000 and annual costs by $40,000. The project will initially require $100,000 in fixed assets which will be depreciated straight-line to a zero book value over the 5-year life of the project. The applicable tax rate is 34 percent. What is the operating cash flow for this project?
The XYZ Company is considering a new project that will have an annual depreciation expense of $3.7 million. If XYZ's corporate tax rate is 13 %, then what is the value of the depreciation tax shield on their new project?
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
You need to determine the viability of a project. The project will cost $650,000 today and have a life of 8 years. It has an unusal CCA rate of 14.0% and is expected to be sold for $100,000 at the end of the project's life. Annual sales revenue is expected to be $585,000 and annual costs are expected to be $465,000. The tax rate is 35.0% and the project's discount rate is 8.5%. Part A: Compute the NPV of the project and state whether you should proceed or not. Part B: Oops - the accountants made a mistake! The actual CCA rate is: 17.0%. Assuming all else is equal, compute the NPV of the project using the new CCA rate and state how much this improves or reduces the NPV of the project.
A proposed expansion project is expected to increase sales by $89,000 and increase cash expenses by $44,000. The project will require $60,000 of fixed assets that will be depreciated using straight-line depreciation to a zero book value over the five-year life of the project. The store has a marginal tax rate of 30 percent. What is the operating cash flow of the project using the tax shield approach? Ignore bonus depreciation.
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%

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