Required: Affiliate A sells 6,200 units to Affiliate B per year. The marginal income tax rate for Affiliate A is 25 percent and the marginal income tax rate for Affiliate B is 40 percent. The transfer price per unit is currently $2,000, but it can be set at any level between $2,000 and $2,400. Derive a formula to determine how much annual after-tax profits can be increased by selecting the optimal transfer price. Note: Do not round intermediate calculations.
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![Required:
Affiliate A sells 6,200 units to Affiliate B per year. The marginal income tax rate for Affiliate A is 25 percent and the marginal income tax
rate for Affiliate B is 40 percent. The transfer price per unit is currently $2,000, but it can be set at any level between $2,000 and
$2,400. Derive a formula to determine how much annual after-tax profits can be increased by selecting the optimal transfer price.
Note: Do not round intermediate calculations.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe92f4e16-e438-462b-9d05-68e2eeefa03a%2F1cff3605-23d9-4e9e-86d1-6d16ddec95fa%2Fdyw9gjr_processed.jpeg&w=3840&q=75)
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- Concrete Corp plans on buying a new mixture at a cost of $150,000. The after tax benefit from this investment will be $23,000 each year for the next 12 years. What is the internal rate of investment? (Round to one decibmal place and do not enter the % sign in your answer)The payback reciprocal is an estimate of the internal rate of return. NUBD Co. is considering the acquisition of a merchandise picking system to improve customer service. Annual cash returns on investment cost of P1.2 million is P240,000. Useful life is estimated at 8 years. The company’s cost of capital is 14% and income tax rate is 35%. Calculate NUBD’s payback reciprocal for this investment.An income-producing property is priced at $600,000 and is expected to generate the following after-tax.cash flows: Year 1: $42,000; Year 2: $44,000; Year 3: $45,000; Year 4: $50,000; and Year 5: $650,000. Calculate the NPV if the required rate of return is 15%. (If the calculated NPV is negative, report it as negative)
- Use the following information of the next 4 questions: Clayton Enterprise considers investing a total of $40,000 in Al automation. • This $40,000 will be 100% depreciated over the three-year life of the project. • The project will require an initial $10,000 investment in NWC and the tax rate is 20%. • At the end of the project's life, the fixed assets will be worth $20,000, and Clayton Enterprise will recover $8,000 that was tied up in working capital. • The OCF for the next 3 years is $32,000. Calculate the CFFA in Yr 0 O-40000 O-70000 O-60000 O-30000 -50000 Show Transcribed Text Calculate the CFFA in Yr 3: CFFA3 O 59000 O 57000 O 54000 O 56000 O 55000 O 58000Two fixtures are being considered for a particular job in a manufacturing firm. The pertinent data for their comparison are summarized in Table. The effective federal and state income tax rate is 25%. Depreciation recapture is also taxed at 25%. If the after-tax MARR is 8% per year, which of the twofixtures should be recommended? State any important assumptions you make in your analysis.A proposed new investment has projected sales of $515,000. Variable costs are 36 percent of sales, and fixed costs are $173,000; depreciation is $46,000. Prepare a pro forma income statement assuming a tax rate of 21 percent. What is the projected net income? (Do not round intermediate calculations.) Sales Variable costs Fixed costs Depreciation EBT Taxes Net income
- Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $185,360 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $87,000, with associated expenses of $31,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 30 percent. (Hint: The $185,360 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.)Suppose you sell a fixed asset for $112,000 when its book value is $112,000. If your company's marginal tax rate is 21 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $112,000 $0 $68,320 $34,720Hyundai is considering opening a plant in two neighboring states. Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000 pretax profit. Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000 of pretax profit. Required: What is the after-state-taxes profit in the state with the 10% tax rate? What is the after-state-taxes profit in the state with the 2% tax rate? Which state should Hyundai choose?
- Suppose that the marginal tax rate is 15%. If a farmer decides to purchase a combine it will increase his revenue by $6,000 per year, but it will also increase his expenses by $1,000 per year. The before tax rate on this investment is 25%. The life of this investment is 6 years. What is the present value of the after tax net return? $14,133 $12,544 $16,084 $13,706 None of the answers are correctb) You purchase equipment for $50,000 and it costs $5,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for $8,500 when you are done with it in 3 years. The company's marginal tax rate is 20%. If the applicable CCA rate is 10% and the required return on this project is 5%, what is the present value of the CCA tax shield by using the formula (10 Marks) IdTc 1+0.5r 1 PV tax shield on CCA Hea d+r 1+r d+r (1 + r)" redictions: On Ps video DELLHyundai is considering opening a plant in two neighboring states. Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is expected to generate $1,250,000 pretax profit. Option 2: The other state has a corporate tax rate of 2 percent. If operated in this state, the plant is expected to generate $1,180,000 of pretax profit. a. What is the after state taxes profit in the state with the 10% tax rate? After state taxes profit b. What is the after state taxes profit in the state with the 2% tax rate? After state taxes profit