A project will increase the sales of your company by $50,000 and increase its expenses by $36,000. The project will cost $30,000 and be depreciated using straight-line depreciation to a zero book value over the 3-year life of the project. The company has a corporate tax rate of 30%. What is the annual operating cash flow of the project using the tax shield approach? a. $12,800. b. $9,100. c. $17,500. d. $15,600. e. $8,400. f. $12,600.

A project will increase the sales of your company by $50,000 and increase its expenses by $36,000. The project will cost $30,000 and be depreciated using straight-line depreciation to a zero book value over the 3-year life of the project. The company has a corporate tax rate of 30%. What is the annual operating cash flow of the project using the tax shield approach? a. $12,800. b. $9,100. c. $17,500. d. $15,600. e. $8,400. f. $12,600.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 11P: The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are...

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General Account
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The Wet Corporation has an investment project that will reduce expenses by $20,000 per year for 3 years. The project's cost is $25,000. If the asset is part of the 3-year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 35%, what is the cash flow from the project in year 1 ?
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The Wet Corporation has an investment project that will reduce expenses by $30,000 per year for 3 years. The project's cost is $30,000. If the asset is part of the 3 year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 29%, what is the cash flow from the project in year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. Multiple Choice $23,650 $24.980 $24.200 $25,660
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
Subject -- General Account