Exercise 3 (After-Tax Costs) Solve each of the following parts independently: a. Sugar Company has hired a management consulting firm to review and make recommendations concerning Sugar's organizational structure. The consulting firm's fee will be P100,000. What will be the after-tax cost of the consulting firm's fee if Sugar's tax rate is 30%? b. The Royal Riding Club has redirected its advertising toward a different sector of the market. As a result of this change in advertising, the club's annual revenues have increased by P40,000. If the club’s tax rate is 30%, what is the after-tax benefit from the increased revenues? c. The Sparkling Stars Basketball Team has just installed an electronic scoreboard in its playing arena at a cost of P210,000. For tax purposes, the entire original cost of the electronic scoreboard will be depreciated over seven years, using the straight-line method. Determine the yearly tax savings from the depreciation tax shield. Assume that the income tax rate is 30%.
Exercise 3 (After-Tax Costs) Solve each of the following parts independently: a. Sugar Company has hired a management consulting firm to review and make recommendations concerning Sugar's organizational structure. The consulting firm's fee will be P100,000. What will be the after-tax cost of the consulting firm's fee if Sugar's tax rate is 30%? b. The Royal Riding Club has redirected its advertising toward a different sector of the market. As a result of this change in advertising, the club's annual revenues have increased by P40,000. If the club’s tax rate is 30%, what is the after-tax benefit from the increased revenues? c. The Sparkling Stars Basketball Team has just installed an electronic scoreboard in its playing arena at a cost of P210,000. For tax purposes, the entire original cost of the electronic scoreboard will be depreciated over seven years, using the straight-line method. Determine the yearly tax savings from the depreciation tax shield. Assume that the income tax rate is 30%.
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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ANSWER a,b,c
Transcribed Image Text:Exercise 3 (After-Tax Costs)
Solve each of the following parts independently:
a. Sugar Company has hired a management consulting firm to review and
make recommendations concerning Sugar's organizational structure. The
consulting firm's fee will be P100,000. What will be the after-tax cost of
the consulting firm's fee if Sugar's tax rate is 30%?
b. The Royal Riding Club has redirected its advertising toward a different
sector of the market. As a result of this change in advertising, the club's
annual revenues have increased by P40,000. If the club's tax rate is 30%,
what is the after-tax benefit from the increased revenues?
The Sparkling Stars Basketball Team has just installed an electronic
scoreboard in its playing arena at a cost of P210,000. For tax purposes,
the entire original cost of the electronic scoreboard will be depreciated
over seven years, using the straight-line method. Determine the yearly tax
savings from the depreciation tax shield. Assume that the income tax rate
is 30%.
C.
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