The after-tax cost of capital is 8%. A project costing $60,000 will be expected to earn cash profits of $40,000 in year 1 and $50,000 in year 2. Taxation at 30% occurs one year in arrears of the profits or losses to which they relate. For the purpose of this exercise, assume that the cost of the project is not an allowable cost for tax purposes (i.e. capital allowances should be ignored). Required Calculate the NRW of the project

The after-tax cost of capital is 8%. A project costing $60,000 will be expected to earn cash profits of $40,000 in year 1 and $50,000 in year 2. Taxation at 30% occurs one year in arrears of the profits or losses to which they relate. For the purpose of this exercise, assume that the cost of the project is not an allowable cost for tax purposes (i.e. capital allowances should be ignored). Required Calculate the NRW of the project

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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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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Mf1. Consider an asset that costs $492,800 and is depreciated straight-line to zero over its 6-year tax life. The asset is to be used in a 2-year project; at the end of the project, the asset can be sold for $61,600. If the relevant tax rate is 22 percent, what is the aftertax cash flow from the sale of this asset?