An equipment's with 5 years useful life is with initial cost of $5,000. After 5 years,the equipment's useful life will be 0. The equipment's value will be depreciatedlinearly. Tax rate=30%. What is the after tax residual value of this equipment at theend of 3th year if the equipment was sold at 4,000.$2800$4200$3400$1500

Cost = $5,000Salvage Value after 5 years = 0Useful life = 5 yearsCapital gains tax rate = 30%Sale…

Answered: An equipment's with 5 years useful life…

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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9. The Lumber Yard is considering a 5-year project that requires initial investment of $96,000 in fixed assets that will be depreciated using the straight-line method to a zero over its 6-year tax life. The company has a marginal tax rate of 32%. If the fixed assets can be sold at $20,000 at the end of the project, how much is the after tax salvage value? A. $5,120 B. $17,280 C. $13,160 D. $25,440 10. A credit card company quotes you an APR of 18%. What is the actual rate of interest you are paying if interest is computed monthly? A. 18.90% B. 19.20% C. 20.62% D. 19.56%
After 10 years 2 properties flat 1 and flat 2 are sold. Their value has increased at an annual rate of 2.67% p.a. and capital gains taxes (CGT) are paid at a rate of 19% on the capital gains. The initial properties flat 1 and flat 2 were purchased by the investor for 450000 and 150000. a) what formulas would i use to calculate the final price of the properties after 10 years with the increase annual rate taken into consideration and what value do you get b) compute the NPV of the sale of each of the 2 flats , after capital gains taxes could you please explain what formuals i would use here and what method i should follow, not necessarily a value for b as not all the data in my spreadsheet i can attach
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4. The Scampini Supplies Company recently purchased a new delivery truck. The new truck has an after-tax cost of $22,500, and it is expected to generate after-tax cash flows, of $6,250 per year. The truck has a 5- year expected life. The expected year-end abandonment values (after-tax salvage values) for the truck are given here. The company's WACC is 10%. Year Annual After-Tax Cash Flow ($22,500) 6,250 6,250 6,250 6,250 6,250 0 1 2 3 5 After-Tax Abandonment Value $17,500 14,000 11,000 5,000 0 a. .Should the firm operate the truck until the end of its 5-year physical life; if not, what is the truck's optimal economic life? b. Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? Explain.
A new machine costs $798,410 and falls in a 26.50% CCA class. The machine will have zero value after 5 years of use but will save $370,940 annually in operating costs before taxes in those five years. Assume a tax rate of 32.73%. Using a required return of 13.67%, what is the present value of the CCA tax shield? Question 18 options: $157,975 $162,026 $166,076 $170,127 $174,178
You purchase a new pizza oven for $9,950 which will have a scrap value of $900. Assuming a 35% depreciation rate, how much depreciation would you recognize in year one when using the Double Declining Balance depreciation method? $2,810 $3167.50 $3482.50 $3.572.75
Consider an asset that costs $369,600 and is depreciated straight-line to zero over its 7-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 $46,200. If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset? Multiple Choice $72,006.00 $35,574.00 $311,862.00 $68,405.70 $75,606.30
A company has purchased a machine (CCA rate 24%) at $300,000 and has a tax rate of 33.00%. By how much will the NPV change if the company is able to obtain a $13,000 salvage value for its machine at the end of the project's life in Year 4? Assume a discount rate of 11.20% and that all else remains the same. Question 10Answer a. $8,502 b. $10,415 c. -$1,913 d. $6,589 e. $10,075
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An equipment's with 5 years useful life is with initial cost of $1,000,000. After 5 years, the equipment's useful life will be The equipment's value will be depreciated linealy. Tax rate = 20% . What is the after tax residual value of this equipment at the end of 4th year if the equipment was sold at 2,000. $ 18200 $ 25700 $20300 $41600

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