Dog Corporation recorded $175,000 in depreciation expenses in the current year. What will be the amount of its tax shield if its tax rate is 30%?
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- The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?A firm invests $10.70 million in a new stamping machine. It depreciates straight-line for tax purposes over 5 years. The tax rate is 21%, inflation is 2% a year, and the discount rate is 8%. What is the PV of the depreciation tax shield?Mojave Corporation was looking at an investment that would generate $5,000 in net income before taxes. The company's tax rate is 21%, and there would be $2,000 a year in depreciation on the assets. What is the after-tax cash flow of this investment? $4,370 $5,950 $3,050 $3,950 O None of the above
- Consider a profitable company with an asset that cost $3 million that is depreciated straight line to zero over. It’s 11 year depreciable tax life. The asset is to be used in a three year project at the end of the project. The asset can be sold for 362,000. If the relevant tax rate is 18%, what is the after tax cash flow from the sale of this asset (after tax salvage)?attachedSuppose you sell a fixed asset for $115,000 when it's book value is $135,000. If your company's marginal tax rate is 21%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
- Adidas bought a $36.4 million piece of equipment. It will be depreciated by $6.07 million per year over 6 years, starting this year (i.e., the same year they purchased it). Suppose Adidas' tax rate is 35%. a. What impact will the cost of the purchase have on earnings for each of the next 6 years? b. What impact will the cost of the purchase have on the firm's cash flow for the next 6 years? Question content area bottom Part 1 a. The impact on earnings will be $enter your response here million each year for 6 years. (Round to two decimal places. Use a negative sign for a decrease in value.) b1. The impact on the firm's cash flow in Year 1 is $enter your response here million. (Round to two decimal places. Use a negative sign for a decrease in value.) b2. The impact on the firm's cash flow in years 2 through 6 is $enter your response here million. (Round to two decimal places. Use a negative sign for a decrease in value.)Accounting question? ?Suppose you sell a fixed asset for $212,000 when its book value is $112,000. If your company’s marginal tax rate is 30 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
- Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s marginal tax rate is 21 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? (Enter your answer as a whole number.)Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 30% and Spherical's marginal corporate tax rate is 29%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 8% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 8% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years? a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is $ (Round to the nearest dollar.)Suppose that Sudbury Mechanical Drifters is proposing to invest $10.8 million in a new factory. It can depreciate this investment straight-line over 10 years. The tax rate is 35%, and the discount rate is 10%. a. What is the present value of Sudbury's depreciation tax shields? (Enter your answers in millions rounded to 1 decimal place.) Total Year 10 Year 9 Year 8 Year 7 Year 6 Year 5 Year 4 Year 3 Year 2 Year 1 Straight-line Schedule $ 10.8 $ 1.1 $ 1.1 $ 1.1 $ 1.1 $ 1.1 $ 1.1 $ 1.1 $ $ 1.1 Straight-line, 10-year $ 1.1 1.1 $ 0.4 $ 0.4 $ 0.4 0.4 $ $ 0.4 0.4 $ 0.4 $ $ $ 0.4 $ 0.4 0.4 Tax Shields at 35% Tc PV (Tax Shields) at 10% b. Suppose that the government allows companies to use double-declining-balance depreciation with the option to switch at any point to straight-line. Now what is the present value of the depreciation tax shields? (Enter your answers in millions rounded to 1 decimal place.) Total Year 10 Year 9 Year 8 Year 7 Year 6 Year 5 Year 4 Year 3 Year 2 Year 1 Double decline…