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...

See similar textbooks

Similar questions

Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in year two, $2,000 in year three. $2,500 in year four, and $2,000 in year five. What is the NPV using 8% as the discount rate? For further instructions on net present value in Excel, see Appendix C.
Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?
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 ?
The Wet Corp. has an investment project that will reduce expenses by $30,000 per year for 3 years. The project's cost is $35,000. If the asset is part of the 3-year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 33%, what is the cash flow from the project in year 1? (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Multiple Choice $23,400 $24,730 $23,950 $25,410
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
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 ?
General Accounting
Please need help with this accounting question
A project will generate before tax cost savings of $110,000 per year, for five years, create additional depreciation expense of $77,000 per year, and result in the following net working capital needs: Time: Accts Rec Inventory Accts Pay 0 100,000 200,000 120,000 1 150,000 300,000 180,000 2...4 150,000 300,000 180,000 The company's marginal tax rate is 30%. What is the project's cash flow in year 1 (t = 1)? 5000
Ernie's Electrical is evaluating a project that will increase sales by $48,000 and costs by $16,000. The project will initially cost $89,000 for fixed assets that will be depreciated straight-line to a zero book value over the 6-year life of the project. The applicable tax rate is 34 percent. What is the project’s annual operating cash flow? Group of answer choices $23,300.13 $21,450.87 $26,163.33 $22,406.67 $18,180.09
A company is considering two mutually exclusive projects. Both require an initial cash outlay of Rs.20000 each and have a life of five years. The company's required rate of return is 10% and pays tax at a 35% rate. The projects with be depreciated on a straight-line basis. The before taxes cashflows (Rs.) Project 1 2 3 4 5 A 8000 8000 8000 8000 8000B 12000 6000 4000 10000 10000 calculate for each project. The NPV and the internal rate of return. Which project should be accepted and why.