Payback; ARR Kurt's Office Services is evaluating the purchase of a state-of-the-art desktop publishing system that costs $40,000, has a six-year life, and has no salvage value at the end of its life. The company's controller estimates that the system will annually generate $13,800 of cash receipts and create $2,760 of cash operating costs. The company's tax rate is expected to be 30 percent during the life of the asset, and the company uses straight-line depreciation. a. Determine the annual after-tax cash flows from the project. $ 9,728 b. Determine the after-tax payback period for the project. Note: Round your answer to one decimal place (i.e. round 4.3555 to 4.4). 4.1 years c. Determine the after-tax accounting rate of return for the project. (Assume tax and financial accounting depreciation are equal.) Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). 5.5 * % Check

Payback; ARR Kurt's Office Services is evaluating the purchase of a state-of-the-art desktop publishing system that costs $40,000, has a six-year life, and has no salvage value at the end of its life. The company's controller estimates that the system will annually generate $13,800 of cash receipts and create $2,760 of cash operating costs. The company's tax rate is expected to be 30 percent during the life of the asset, and the company uses straight-line depreciation. a. Determine the annual after-tax cash flows from the project. $ 9,728 b. Determine the after-tax payback period for the project. Note: Round your answer to one decimal place (i.e. round 4.3555 to 4.4). 4.1 years c. Determine the after-tax accounting rate of return for the project. (Assume tax and financial accounting depreciation are equal.) Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). 5.5 * % Check

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...

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