Ford Motor Company is considering launching a new line of hybrid diesel-electric SUVS. The heavy advertising expenses associated with the new SUV launch would generate operating losses of $30 million next year. Without the new SUV, Ford expects to earn pretax income of $90 million from operations next year. Ford paysa 20% tax-rate on its pretax income. The amount that Ford Motor Company owes in taxes next year with the launch of the new SUV is closest to:O A. $18.0 millionO B. $24.0 millionO C. $6.0 millionO D. $12.0 million

Taxes can be calculated on the net operating income of the company. The operating losses which will…

Ford Motor Company is considering launching a new line of hybrid diesel-electric SUVS. The heavy advertising expenses associated with the new SUV launch would generate operating losses of $30 million next year. Without the new SUV, Ford expects to eam pretax income of $90 million from operations next year. Ford pays a 20% tax-rate on its pretax income. The amount that Ford Motor Company owes in taxes next year with the launch of the new SUV is closest to: O A. $18.0 million O B. $24.0 million OC. $6.0 million OD. $12.0 million

Ford Motor Company is considering launching a new line of hybrid diesel-electric SUVS. The heavy advertising expenses associated with the new SUV launch would generate operating losses of $30 million next year. Without the new SUV, Ford expects to eam pretax income of $90 million from operations next year. Ford pays a 20% tax-rate on its pretax income. The amount that Ford Motor Company owes in taxes next year with the launch of the new SUV is closest to: O A. $18.0 million O B. $24.0 million OC. $6.0 million OD. $12.0 million

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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Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $37.00 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $17.40 million. The firm’s tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? (Enter your answer in millions rounded to 1 decimal place.) After-tax cash flow
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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 36%. 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 12% 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 12% 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.) Question Viewer
Quick Computing installed its previous generation of computer chip manufacturing equipment 3 years ago. Some of that older equipment will become unnecessary when the company goes into production of its new product. The obsolete equipment, which originally cost $40 million, has been depreciated straight-line over an assumed tax life of 5 years, but it can be sold now for $18 million. The firm's tax rate is 30%. What is the after-tax cash flow from the sale of the equipment? Note: Enter your answer in millions rounded to 2 decimal places. After-tax cash flow million
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Spherical Manufacturing recently spent $19 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 45% and Spherical's marginal corporate tax rate is 28%. 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 10% 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 10% 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?
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