Spherical Manufacturing recently spent $19 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 45% and Spherical's marginal corporatetax rate is 28%.a. What are the annual CCA deductions associated with this equipment for the first five years?b. What are the annual CCA tax shields for the first five years?c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 10% per year?d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 10% per year?e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years?

Net present value is one of the best methods of evaluating a project wherein the project is accepted…

Answered: Spherical Manufacturing recently spent…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter15: Choice Of Business Entity—other Considerations

Section: Chapter Questions

Problem 68P

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Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 30% and Spherical's marginal corporate tax rate is 29%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 8% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 8% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years? a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is $ (Round to the nearest dollar.)
Spherical Manufacturing recently spent $15 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 30% and Spherical's marginal corporate tax rate is 36%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 12% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 12% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years? a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is $ (Round to the nearest dollar.) Question Viewer
Spherical Manufacturing recently spent $18 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 45% and Spherical's marginal corporate tax rate is 39%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 12% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 12% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years? CHOD a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is $ 4,050,000. (Round to the nearest dollar) The CCA deduction for year 2 is $. (Round…
Spherical Manufacturing recently spent $11 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCCA rate of 45% and Spherical's marginal corporate tax rate is 37%. a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 8% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 8% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years?
Spherical Manufacturing recently spent $16 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 45% and Spherical's marginal corporate tax rate is 34% a. What are the annual CCA deductions associated with this equipment for the first five years? b. What are the annual CCA tax shields for the first five years? c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 12% per year? d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 12% per year? e. How might your answer to part (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five years? a. What are the annual CCA deductions associated with this equipment for the first five years? The CCA deduction for year 1 is $3600000 (Round to the nearest dollar) The CCA deduction for year 2 is $ (Round to the…
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