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: McPherson Company must purchase a new milling machine. The purchase price is $50,000, including…

A:

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

A: As per the given information: Earnings before depreciation before replacement  - $30,000 Earnings…

Q: Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on…

A: Data given: Sale price=$595,641 Book value after 10 years=$670,000 Tax rate=31%

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

A: Net Present Value - It is the difference between the present value of cash outflow and present value…

Q: Daily Enterprises is purchasing a $10.58 million machine. It will cost $74,461.00 to transport and…

A: Net present value (NPV) is the difference  between present value of all cash inflows and initial…

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: MotoSport is buying an asset that costs $730, 000 and can be depreciated at 20 percent per year…

A: The CCA can be claimed for the depreciation amount charged each year. The asset will be useful for…

Q: The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece…

A: Book value of the asset refers to the value of asset after depreciation for the year.

Q: Your firm needs a computerized machine tool lathe which costs $55,000 and requires $12,500 in…

A: Depreciation Tax Shield: It is possible to reduce taxable income by using a depreciation tax shield,…

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

A: Concept.  Net present value is calculated by deducting initial investment from present value of cash…

Q: Pink Petunias, a wholesale nursery, is considering purchasing a new plot of land for their business…

A: Payback period is the length of time in which an investment reaches its break-even point. In other…

Q: Manning Corporation is considering a new project requiring a $90,000 investment in test equipment…

A: “Since you have posted a question with multiple subparts, we will be solving the first three…

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: Brummit Corporation, is evaluating a new 4 year project. The equipment necessary for the project…

A: The projected residual value of an asset at the end of its useful life is referred to as salvage…

Q: a. What is the NAL for Wildcat? (Do not round intermediate calculations and enter your answer in…

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

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: Pulaski Starlight Inc. is evaluating a project. The project is expected to generated new sales of…

A: Compute the year 3 depreciation expense, using the equation as shown below: Depreciation=Equipment…

Q: Comey Products has decided to acquire some new equipment having a $240,000 purchase price. The…

A: Step 1:

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

A: Step 1. Calculate the annual depreciation expense.The drilling system costs $9.8 million and will be…

Q: Talia's tutus bought a new sewing machine for $55000 that will be depreciated over 5 years using…

A: Depreciation is the reduction in the value of asset due to obsolence, wear and tear or usage.…

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: 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: 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: Talia’s Tutus bought a new sewing machine for $50,000 that will be depreciated over 5 years using…

A: Cost of machine= $50000 Useful life = 5 Years Rate of depreciation = 20% Year Adjusted Balance…

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: The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece…

A: The projected residual worth of an asset at the end of its useful life is referred to as salvage…

Q: Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be…

A: TCF = Selling price - book value - Tax.

Q: Sandhill Corporation just purchased computing equipment for $22,000. The equipment will be…

A: The term depreciation refers to the process of systematically allocating the cost of an asset over…

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: Talia’s Tutus bought a new sewing machine for $45,000 that will be depreciated over 5 years using…

A: Depreciation charge is a method used to allocate the cost of a tangible asset, like machinery or…

Q: to Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in…

A: Salvage value is the value at the end of a project when equipment is sold, If equipment is sold…

Q: Floopy Co has decided to purchase new equipment. They are in the 38% tax bracket.  The desired…

A: ParticularsAmountEquipment cost      77,000Interest12%Tax rate38%Loan payments…

Q: A firm purchased $62,800 of fixed assets two years ago. The company no longer needs these assets so…

A: Net cash flow from sales is the amount of cash generated or consumed from the sale of goods or…

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: The Jones Company has just completed the third year of a five-year MACRS recovery period for a piece…

A: MACRS Schedule for a Depreciation Rate in % for a 5 year Recovery Period is:20% in Year 1 32% in…

Q: Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in…

A: Depreciation tax shield refers to the tax savings that a company receives due to the tax-deductible…

Q: A mixer was purchased two years ago for $63346 and can be sold for $171667 today. The mixer has been…

A: Tax rate=40%MACRS 5 years

Q: Grove Media plans to acquire production equipment for $845,000 that will be depreciated for tax…

A: Present value refers to the method of capital budgeting used for estimating the current value of…

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.