2. You plan on buying a bottling machine for $2million, which can be salvaged for $400,000 in 8years. Your tax rate is 43% and the CCA rate is30%. Your cost of capital is 13%. What ispresent value of the CCA tax sheild? (Answer: E)a. $338,447 b. $378,521 c. $422,781 d. $458, 402e. $520,348

CCA is a capital cost deduction like depreciation and takes advantage of tax deductions and hence…

Answered: You plan on buying a bottling machine…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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If we add to our problem that Builtrite also had $20,000 in interest expense and that they were in the 39% income tax bracket, how much would this interest expense cost Builtrite after taxes? $12,200 $7,800 $3,900 $20,000
A project will reduce costs by $42,700 but increase depreciation by $21,100. What is the operating cash flow if the tax rate is 25 percent? Multiple Choice $47,850 $37,300 $32,025 $15,950 $26,500
Company X is considering two investment options. Both options require an investment-$400,000. Option 1: Expected rate of return - 12.0%, tax rate - 20.0 % Option 2: Expected rate of return - 9.0%, tax rate - 25.0% Compute the DIFFERENCE in before tax income between the two options O Option 1 exceeds Option 2 by $14,000 O Option 1 exceeds Option 2 by $12,000 None of the other answers are correct exceeds Option 2 by $10,000 O Option 1 O Option 2 exceeds Option 1 by $10,000
Assume that you calculated the ATER after year 3 as $275,000, the after-tax cash flow in year 4 was $6,800 and grew by 3% until year 8, and the ATER in year 8 was $300,000. Use this information to calculate the incremental IRR for not selling the property and collecting rents for years 4-8. What is the incremental IRR for not selling the property? A. 2.88% B. 4.29% C.-41.90% D. 6.40%
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6. A machine could be purchased for £800,000; it would be used for 3 years and then sold for £580,000. It would qualify for capital allowances at 18% reducing balance basis with a balancing allowance or charge on disposal. The company pays tax at 20% and has a cost of capital of 10%. What is the present value of the tax cashflow at time 1, to the nearest £100? A £14,700 B £26,200 C £28,800 D £144,000
I really need help on solving this correctly since I'm not understanding the problem Please help! Thank you. UCFAT is a level perpetuity. Firm Value= $ 100m Present value of tax benefits=20 million. Amount of debt= unknown. Interest rate on debt=10% Unlevered cost of Equity = 20% Depreciation= $ 1 million per year. New Equipment= 1 million per year. UCFAT is unlevered cash flow after tax Question content area bottom: Part 1 Use 99 if the answer is indeterminate a) WACC of the firm is? % (Round to two decimals) b) Tax Rate is ? % (Round to two decimals)
A machine could be purchased for £800,000; it would be used for 3 years and then sold for £580,000. It would qualify for capital allowances at 18% reducing balance basis with a balancing allowance or charge on disposal. The company pays tax at 20% and has a cost of capital of 10%. What is the tax cash flow at time 3, to the nearest £100? A £8,400 inflow B £8,400 outflow C £19,365 inflow D £19,365 outflow
5. Koral Corporation can invest in a project that costs $400,000. The projectisexpectedtohaveanafter-taxreturnof$250,000ineachof years 1 and 2. Koral normally uses a 10 percent discount rate to evaluate projects but feels it should use 12 percent to compensate for inflation.Howmuchdifferencedoestheratemakeintheafter-taxnet present value of the project? a. S50,000 b. $22,500 c. $20,000 d. S11,250
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You plan on buying a bottling machine for $2 llion, which can be salvaged for $400,000 in 8 ars. Your tax rate is 43% and the CCA rate is %. Your cost of capital is 13%. What is esent value of the CCA tax sheild? (Answer: E) $338,447 b. $378,521 c. $422,781 d. $458, 402