Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $280,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Earnings before Depreciation $79,000 92,000 65,000 44,000 34,000 25,000 The firm is in a 25 percent tax bracket and has a 9 percent cost of capital a. Calculate the net present value. (A negative amount should be indicated by a minus sign. Do not round intermediate calculatio and round your answer to the nearest whole dollar amount.) Not present value

Oregon Forest Products will acquire new equipment that falls under the five-year MACRS category. The cost is $280,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years. Use Table 12 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Earnings before Depreciation $79,000 92,000 65,000 44,000 34,000 25,000 The firm is in a 25 percent tax bracket and has a 9 percent cost of capital a. Calculate the net present value. (A negative amount should be indicated by a minus sign. Do not round intermediate calculatio and round your answer to the nearest whole dollar amount.) Not present value

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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A corporation expects to receive $32,000 each year for 15 years from the sale of a product. There will be an initial investment of $150,000. Manufacturing and sales expenses will be $8067 per year. Assume straight line depreciation, a 15-year useful life and no salvage value. Use a 46% income tax rate. What is the before andafter-tax rate of return? No excel Please and thank you
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).
J.B. Enterprises is considering the purchase of new equipment with a cost of $1,000,000. If the equipment is purchased, the incremental net cash flows are expected to be $300,000 per year for five years. These net cash flows already reflect the of the equipment and the company’s 40% tax rate. However, there are liability risks associated with the use of this product. The board of directors estimates a “cost of worry” of $25,000 per year. Calculate the net present value of this project incorporating the cost of worry if the company’s cost of capital is 10%. a. $42,466 b. $340,909 c. $375,000 d. $61,420
Hubrey Home Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $3.2 million. The fixed asset falls into Class 10 for tax purposes (CCA rate of 30% per year), and at the end of the three years can be sold for a salvage value equal to its UCC. The project is estimated to generate $2,580,000 in annual sales, with costs of $817,000. If the tax rate is 35%, what is the OCF for each year one, two and three of this project? (Round to two decimal places)
Please provide detailed explanation
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.
MotoSport is buying an asset that costs $730,000 and can be depreciated at 20 percent per year (Class 8) over its eight-year life. The asset is to be used in a three-year project at the end of the project, the asset can be sold for $740,200. The company faces a tax rate of 26% The sale of this asset will close the asset class. The from the sale of asset is Multiple Choice Capital gain; $10,200 Capital gain; $319,720 Terminal loss, $10,200 Terminal loss; $319,720 Capital gain: $11,583
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

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