Relativity Inc. bought a new fully automated machining cell (MACRS-GDS 3 year property) that costs $250,000 and has a planned salvage value of $17,000 after a useful life of 4 years. The tool generates a net savings of $47,000 per year. The total effective corporate tax rate is 23 percent. What is E, the CFAT in year 3? Depr. Year 0 1 2 3 CFBT $(250,000) TI Tax CFAT $ 47,000 $ 83,325 $ (36,325) $ (8,355) $ 55,355 $ 47,000 $ 111,125 $ (64,125) $ (14,749) $ 47,000 A B C D E PW of CFAT $(250,000) F G H Where CFBT Cash Flow Before Tax; Depr= Depreciation; TI = Taxable Income; Tax = Tax; CFAT = Cash Flow After Tax; PWofCFAT = Present Worth of Cash Flow After Tax.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Relativity Inc. bought a new fully automated machining cell (MACRS-GDS 3 year
property) that costs $250,000 and has a planned salvage value of $17,000 after a
useful life of 4 years. The tool generates a net savings of $47,000 per year. The
total effective corporate tax rate is 23 percent.
What is E, the CFAT in year 3?
Depr.
Year
0
1
2
3
CFBT
$(250,000)
Tax
$ 47,000 $ 83,325 $ (36,325) $ (8,355) $ 55,355
$
47,000 $ 111,125 $ (64,125) $ (14,749)
D
$ 47,000
A
B
C
=
CFAT PW of CFAT
$(250,000)
F
G
H
Where CFBT Cash Flow Before Tax; Depr Depreciation; TI = Taxable Income: Tax
=
= Tax; CFAT Cash Flow After Tax; PWofCFAT = Present Worth of Cash Flow After
Tax.
=
Transcribed Image Text:Relativity Inc. bought a new fully automated machining cell (MACRS-GDS 3 year property) that costs $250,000 and has a planned salvage value of $17,000 after a useful life of 4 years. The tool generates a net savings of $47,000 per year. The total effective corporate tax rate is 23 percent. What is E, the CFAT in year 3? Depr. Year 0 1 2 3 CFBT $(250,000) Tax $ 47,000 $ 83,325 $ (36,325) $ (8,355) $ 55,355 $ 47,000 $ 111,125 $ (64,125) $ (14,749) D $ 47,000 A B C = CFAT PW of CFAT $(250,000) F G H Where CFBT Cash Flow Before Tax; Depr Depreciation; TI = Taxable Income: Tax = = Tax; CFAT Cash Flow After Tax; PWofCFAT = Present Worth of Cash Flow After Tax. =
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