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a. For Year 6, what is the cash flow before taxes, CFBT? S b. For Year 6, what is the taxable income, TI? S c. For Year 6, what is the amount of taxes, Taxes? $ d. For Year 6, what is the cash flow after taxes, CFAT? S e. What is the after-tax Rate of Return over the study period? f. If the company's MARR is 16%, should they invest in this equipment? (nearest dollar) (nearest dollar) (nearest dollar) (nearest dollar) % (one decimal) (YES

a. For Year 6, what is the cash flow before taxes, CFBT? S b. For Year 6, what is the taxable income, TI? S c. For Year 6, what is the amount of taxes, Taxes? $ d. For Year 6, what is the cash flow after taxes, CFAT? S e. What is the after-tax Rate of Return over the study period? f. If the company's MARR is 16%, should they invest in this equipment? (nearest dollar) (nearest dollar) (nearest dollar) (nearest dollar) % (one decimal) (YES

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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a. For Year 6, what is the cash flow before taxes, CFBT? Ś b. For Year 6, what is the taxable income, TI? $ c. For Year 6, what is the amount of taxes, Taxes? $ d. For Year 6, what is the cash flow after taxes, CFAT? S (nearest dollar) (nearest dollar) (nearest dollar) e. What is the after-tax Rate of Return over the study period? f. If the company's MARR is 16%, should they invest in this equipment? or NO) (nearest dollar) % (one decimal) (YES
Transcribed Image Text:a. For Year 6, what is the cash flow before taxes, CFBT? Ś b. For Year 6, what is the taxable income, TI? $ c. For Year 6, what is the amount of taxes, Taxes? $ d. For Year 6, what is the cash flow after taxes, CFAT? S (nearest dollar) (nearest dollar) (nearest dollar) e. What is the after-tax Rate of Return over the study period? f. If the company's MARR is 16%, should they invest in this equipment? or NO) (nearest dollar) % (one decimal) (YES
6 A portion of the after-tax cash flow analysis is shown below. The manufacturer's combined marginal tax rate is 39%. 5 A manufacturer plans to spend $3,700,000 on equipment. The equipment will be depreciated using the MACRS method with a 5-year recovery period. The manufacturer plans to keep the equipment indefinitely and uses a study period of 6 years for these types of purchases. Annual operating expenses are expected to be $50,000 in year 1 and increase by $70,000 each year. Gross income is expected to be $900,000 in year 1 and increase by $170,000 each year. 4 Year 0 1 2 3 GI $1,750,000 OE $400,000 CFBT (a) Dt $213,120 TI (b) Taxes CFAT -$3,700,000 $807,100 $1,041,260 $917,556 $867,734 $928,734 (d)
Transcribed Image Text:6 A portion of the after-tax cash flow analysis is shown below. The manufacturer's combined marginal tax rate is 39%. 5 A manufacturer plans to spend $3,700,000 on equipment. The equipment will be depreciated using the MACRS method with a 5-year recovery period. The manufacturer plans to keep the equipment indefinitely and uses a study period of 6 years for these types of purchases. Annual operating expenses are expected to be $50,000 in year 1 and increase by $70,000 each year. Gross income is expected to be $900,000 in year 1 and increase by $170,000 each year. 4 Year 0 1 2 3 GI $1,750,000 OE $400,000 CFBT (a) Dt $213,120 TI (b) Taxes CFAT -$3,700,000 $807,100 $1,041,260 $917,556 $867,734 $928,734 (d)
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