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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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)
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 58000
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?
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 correct
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 new investment has projected sales of $450,000. Costs of goods sold are 40% of sales, and fixed costs are $100,000. The depreciation expense is $75,000. Assume a tax rate of 40%. What is the (after-tax) net income? Note: please write down the answer to this question, which is needed for the next question. $57,000 $95,000 $38,000 $61,750
1. Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet. 2-a. Compute the simple rate of return promised by the outlet. 2-b. If Mr. Swanson requires a simple rate of return of at least 18%, should he acquire the franchise? 3-a. Compute the payback period on the outlet. 3-b. If Mr. Swanson wants a payback of two years or less, will he acquire the franchise?
A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
C Corp. faces a marginal tax rate of 35 percent. One project that is currently under evaluation has a cash flow in the fourth year of its life that has a present value of $10,000 (after-tax). C Corp. assumes that all cash flows occur at the end of the year and the company uses 11 percent as its discount rate. What is the pre-tax amount of the cash flow in year 4? (Round to the nearest dollar.) * A. $15,181 B. $23,356 C. $9,868 D. $43,375
Suppose you sell a fixed asset for $110,000 when its book value is $130,000. If your company's marginal tax rate is 21 percent, what will be the effect on cash flows of this sale (i.e., what wilIl be the after-tax cash flow of this sale)? (Enter your answer as a whole number.)

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