Xon, a small oil equipment company, purchased a new petroleum drilling rig for $2,000,000. Xon will depreciate it using MACRS depreciation. The drilling rig has been leased to a firm, which will pay Xon $750,000 per year for 8 years. After 8 years the drilling rig will belong to the firm. Xon has a 28% combined incremental tax rate and a 20% after-tax MARR (a) Does the investment appear to be satisfactory? (b) Some claim that the coal and/or oil industries are inherently unsustainable and harmful to the environment. Develop a short position summary to support and challenge this perspective.

Q: Nodhead College needs a new computer. It can either buy it for $250,000 or lease it from Compulease.…

A: As per the given information:

Q: A firm purchased $120,000 worth of light general-purpose trucks. The operations of the trucks lead…

A: The internal rate of return, or IRR, can be used to determine the return on investment of an…

Q: Gemini, LLC, invested $1 million in a state-of-the-art information system that promises to reduce…

A: Computation of After-tax net present value of Gemini new information system is as follows:

Q: Thomas Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 21% . The…

A: Net present value is the amount which is left after deducting the discounted cash inflows from the…

Q: Gemini, LLC, invested $1 million in a state-of-the-art information system that promises to reduce…

A: NPV=-INITIAL CASHFLOW+PRESENT VALUE OF FUTUTRE CASHFLOW

Q: An company uses a technology which it purchased for $15 million. Operating costs are $2 million per…

A: IRR stands for internal rate of return and refers to a method that is used for analyzing the…

Q: This project will require an investment of $20,000 in new equipment. Under the new tax law, the…

A: Given information: Initial investment : $20,000 Tax rate : 25% WACC (cost of capital) : 11% Under…

Q: A firm with a 34% combined federal/state tax rate is considering purchasing equipment that falls in…

A: Depreciation rates from 5 years MACRS depreciation table: Year 1 Year 2 Year 3 Year 4 Year 5…

Q: BBL Inc. is considering an equipment for its new factory. It can either purchase the equipment for…

A: In the given question we are provided with the information of BBL Inc. With the given information in…

Q: Startle Corporation wants to purchase a new production machine. They currently have an old machine,…

A: Particulars  Value Cost of new machine 600000 Time Period(years)  5 Tax rate 0.3 To Find:…

Q: St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a…

A: PV is the Capital Budgeting technique used to evaluate the profitability and feasibility of the…

Q: A machine is purchased for $500,000 and is used through the end of Year 2. The machine falls under…

A: A tax deduction refers to an eligible expense or cost that can be subtracted from your taxable…

Q: A company purchased a new forging machine to manufacture disks for airplane turbine engines. The new…

A: (a) Determine the book value of the asset at the beginning of each tax year. Workings:

Q: A flatbed truck is to be purchased by HaulCo for $70,000. The truck is a Class 16 asset. HaulCo's…

A: Capital cost allowance (CCA) is one of the methods of charging depreciation expense. This method is…

Q: David's company is considering the acquisition of machine which belongs to a class with CCA rate of…

A: A person or company may decrease the amount of income that is subject to taxation by using a tax…

Q: A firm invests $10.70 million in a new stamping machine. It depreciates straight-line for tax…

A: It is a problem that requires the calculation of the present value of tax savings due to…

Q: Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost…

A: Salvage value refers to the residual value, that is, the value at which the equipment can be traded…

Q: XYZ Company plans to invest $1 million in a new plant which is expected to produce a uniform annual…

A: Net Present Value: It is the difference  between the current worth of money inflows  and outflows…

Q: A company purchases an industrial laser for ​$123,000. The device has a useful life of 4 years and a…

A: After tax cash flow can be determined by deducting depreciation and taxes from the operating cash…

Q: The Deacon Co. is a pharmaceutical firm that has decided to acquire a new line of centrifuges to…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: Scallop Corporation purchased oil exploration equipment for $600,000 that will be depreciated over…

A: After-tax rate of return can be defined as the financial benefit towards the invested funds after…

Q: Three years ago, your firm bought a new machine for $3,000. The machine was depreciated on a…

A: Remaininglife=6years−3years=3YearsBookvalue=(Purchaseprice)∗Remaininglife/Totallife.=($3,000)∗3/6.=$…

Q: milan purchases equipment costing $509,634. the ewuipment is to be depreciated straight line to zero…

A: Terminal cash flow can be calculated by with the help of following formula  Terminal Cash Flow…

Q: Xon, a small oil equipment company, purchased a new petroleum drilling rig for S2,000,000. Xon will…

A: Given information: Cost of petroleum rig : $2,000,000 Cash flows received over 8 years :$750,000…

Q: Trestle Corporation wants to purchase a new finishing machine. They currently have an old machine,…

A: >Net initial investment is the amount of cost incurred at the beginning for the investment as…

Q: Seminole Corporation is a manufacturer of graduation caps and gowns subject to a 20% tax rate.…

A: Loss on the Sale of Equipment does not lead to any kind of cash flow. Therefore, it will not be…

Q: Seminole Corporation is a manufacturer of graduation caps and gowns subject to a 20% tax rate.…

A: Cost of New Machine= $100,000Sale Value of Old Machine= $10,000Loss on sale= $10,000Tax rate=…

Q: The Wildcat Oil Company is trying to decide whether to lease or buy a new computer- assisted…

A: A lease payment is a payment made under the terms of a written lease agreement between the owner of…

Q: Ganyao's firm, InvesTek, manufactures silicon wafers for the high-tech industry. His firm just paid…

A: selling price = $655,000 life of project = 4 years accumulated depreciation = cost of equip×sum of…

Q: Raptor Corporation has decided to purchase a new machine that costs $2.175 million. The machine will…

A: Calculate the depreciation tax shield as follows:Calculate the after-tax lease payment as…

Q: St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a…

A: Replacing machinery may be a huge capital expense for the firm or enterprise therefore a lot of…

Q: Delta Electric Company expects to have an annual taxable income of $500,000 from its residential…

A:

Q: Sphencal Manuacturing recently spent 14 mion to purchase some euipment used in the mandacte of dsk…

A: calculations are as follows.

Q: The Wyoming Wind Power Co. has decided to acquire a new piece of capital equipment. These units cost…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: Capital gains tax) The J. Harris Corporation is considering selling one of its old a alue of zero.…

A: Depreciation is the process of reducing the value of the assets. It is a non-cash expense of the…

Q: .Calculate (a) net present value, (b) payback period, and (c) internal rate of return.

A: Net Present Value is the excess of present value of cash inflow to that of present value of cash…

Q: Martin D. Martian Inc. is considering the purchase of a new argyle sock knitting machine to replace…

A: NINV is initial net investment for the project which is required at initial level of investment. It…

Q: firm purchased $120,000 worth of light general-purpose trucks. The operations of the trucks lead to…

A: The same formula is used to calculate IRR as it is for NPV. Keep in mind that the IRR does not…

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.