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 taxrate 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.

To decide the ideal exchange value that expands after-charge benefits for both Subsidiary An and…

Answered: Required: Affiliate A sells 6,200 units…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 16EA: Project B cost $5,000 and will generate after-tax net cash inflows of $500 in year one, $1,200 in...

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Affiliate X sells 13,600 units to Affiliate Y per year. The marginal tax rates for X and Y are 20 percent and 30 percent, respectively. The transfer price per unit is currently set at $1,000, but it can be set as high as $1,250. Calculate the increase in annual after-tax profits if the higher transfer price of $1,250 per unit is used.
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)
A proposed new investment has projected sales of $550,000. Variable costs are 40 percent of sales, and fixed costs are $130,500; depreciation is $50,750. Prepare a pro forma income statement assuming a tax rate of 23 percent. What is the projected net income? Answer Sales Variable costs Fixed costs Depreciation EBT Taxes Net income
Two 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
Hyundai 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?
Question: You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $100 initially, and then $145 per year in maintenance costs. Machine B costs $170 initially, has a life of three years, and requires $120 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine. The discount rate is 11 percent and the tax rate is zero. Calculate the EAC. (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.). Which one should you choose?
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b) 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 DELL
A project has the following net profit after tax set out below. The average book value of the assets in the project is 131,028. What is the accounting rate of return of this project? Enter your final answer in decimals to four decimal places (e.g., if your answer is 5.55%, then enter 0.0555). Year Net Profit After Tax 1 5,097 2 7,365 3 8,627 4 10,946
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