CA large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of S0 at the end of the o-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 ually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is ormine the tax for Year 2 (only - not a total).

CA large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of S0 at the end of the o-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 ually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is ormine the tax for Year 2 (only - not a total).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The projections are based on current economic conditions without consideration of price or cost escalations. Nevertheless, a general inflation rate of 4% is expected, and it is anticipated that all future costs and revenues will react to this inflation. Determine the after-tax CF (in actual dollars) for Year 1 (only).
You are given the following information about a corporation. • The project will require an initial investment of $30,000 in 2019 that will be depreciated over a three-year period towards a zero-salvage value using straight-line depreciation. • The sales and costs in 2020 are $30,000 and $10,000, respectively. • The firm estimates that additional earnings before depreciation, interest and taxes (EBDIT) will grow at a rate of 5% per year over the next two years. • You estimate that this new project will need net working capital equals to $2,000 at the start of the project and after that it will be calculated on the basis of 10% of EBDIT each year. • The firm faces a 15% tax rate, Calculate the project’s annual free cash flow (FCF) for each year (2019, 2020, 2021 and 2022).
Sb. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000O and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10% Determine the taxable income for Year 2 (only - not a total). Edit Format Table
Mid-America Shipping is considering purchasing a new barge for use on its Ohio River routes. The new barge will cost S13.2 million and is expected to generate an income of $7.5 million the first year (growing $1M each year), with additional expenses of $2.6 million the first year (growing $400,000 per year). If Mid-America uses MACRS, is in the 26% tax bracket, and has a MARR of 12%, what is the present worth of the first 4 years of after-tax cash flows from this barge? Would you recommend that Mid-America purchase this barge? Does your answer change at 5 or 6 or 7 or ...years?
A project requires initial asset investment of $1 million. The asset will last for 8 years, and will be depreciated for tax purposes at the CCA rate of 30%. The required return on this project is 16%, and the marginal corporate tax rate is 36%. Assuming that the asset will have a salvage value of $50,000 at the end of Year 8. what is the present value of the CCA tax shields from this project? Multiple Choice 204111.57 $215.009.97 $218.59071 $234.782.61
A corporate expects to receive $37,399 each year for 15 years if a particular project is undertaken. There will be an initial investment of $105,308. The expenses associated with the project are expected to be $7,716 per year. Assume straight-line depreciation, a 15- year useful life, and no salvage value. Use a combined state and federal 48% marginal tax rate, MARR of 8%, determine the project's after-tax net present worth. Enter your answer as follow: 123456.78
Plant company is contemplating the purchase of a new piece of equipment for $59,000. Plant is in the 20% income tax bracket.
A corporate expects to receive $35,900 each year for 15 years if a particular project is undertaken. There will be an initial investment of $121,595. The expenses associated with the project are expected to be $7,608 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 48% marginal tax rate, MARR of 8%, determine the project's after-tax net present worth.
Sa. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the before-tax CF for Year 2 (only – not a total).
A corporation expects to receive $32,000 each year for 15 years if a particular project is undertaken. There will be an initial investment of $150,000. The expenses associated with the project are expected to be $7500 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 28% marginal tax rate, and determine the project’s after-tax rate of return.
Example: A corporation is contemplating the purchase of some specialized machinery. The machinery will cost $250,000 and will be depreciated over its five year life by using the straight line method. Annual inflows of $300,000 and cash operating expenses of $220,000 are anticipated as a result of this new machinery. The corporation is subject to a 40 percent income tax rate. The payback period on this investment (rounded to the nearest tenth) is:
Your Company is considering a new project that will require $1,090,000 of new equipment at the start of the project. The equipment will have a depreciable life of 7 years and will be depreciated to a book value of $484,500 using straight-line depreciation. The cost of capital is 14%, and the firm's tax rate is 21%. Estimate the present value of the tax benefits from depreciation (closest to). Multiple Choice $77,897 $86,500 Help Save & Exit $18,165 Se