You purchased a machine for $1.14 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40%. If you sell the machine today (after three years of depreciation) for $767,000, what is your incremental cash flow from selling the machine? Your total incremental cash flow will be $ (Round to the nearest cent.)

You purchased a machine for $1.14 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 40%. If you sell the machine today (after three years of depreciation) for $767,000, what is your incremental cash flow from selling the machine? Your total incremental cash flow will be $ (Round to the nearest cent.)

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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2. Suppose that you are considering speculating on some vacant land located on Bali Hai, an island in the South Pacific. You could acquire the land today for $850,000. You plan on holding it for fifteen years and then selling it. Annual taxes, insurance and upkeep (mowing, clearing of debris, etc.) of the land will be $35,000, paid at the end of the first year. These costs will increase annually at a 2.5% rate until you sell the land at the end of the fifteenth year. If you require an annual rate of return of 20%, what is the minimum amount that you have to net (after commissions, transfer taxes, fees, etc.) on the sale of this land at the end of the final year to earn your required rate of return? (Ignore income taxes)
4
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $19,000 and will be depreciated straight-line over 7 years to a salvage value of zero. The grill will have no effect on revenues, but will save Johnny's $20,000 in energy expenses. The tax rate is 31 percent. What are the operating cash flows in years 1 to 7? Enter your answer below. Number
Suppose you sell a fixed asset for $212,000 when its book value is $112,000. If your company’s marginal tax rate is 30 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
You purchased a machine for $1.17 million three years ago and have been applying straight-line depreciation to zero for a seven-year life. Your tax rate is 38%. If you sell the machine today (after three years of depreciation) for $788,000, what is your incremental cash flow from selling the machine?
You can buy a piece of vacant land for $40,000 cash. You plan to hold it for 20 years and then sell it at a profit. During this period, you would pay annual property taxes of $815. You would have no income from the property. (a) Assuming that you want an 8% rate of return, at what net price would you have to sell the land 20 years hence? (b) What is open space conservation and why is it important? What options would you have in selling your property with this in mind?
You are a small business owner and have purchased a $10,000 asset that you can depreciate over four years ($2,500/per year). Under accelerated depreciation, you would be allowed to depreciate 75% of the asset's value immediately in the first year and the remaining 25% in the second year. Assume that the discount rate is 10%. Further suppose that your business usually makes $56,000 of annual profit, on which it pays a 21% tax every year. Should you claim accelerated depreciation, or should you depreciate the asset over the 4 years at $2,500 per year?
Sussman industries purchased a drilling machine for $50,000 and paid cash. Sussman expects to use the machine for ten years after which it will have no value. It will be depreciated straight-line over the ten years. Assume a marginal tax rate of 40%. What are the cash flows associated with the machine?A. At the time of purchase?b. In each of the following ten years?
What is the expected after - tax cash flow from selling a piece of equipment if Probst purchases the equipment today for $548, 860.00, the tax rate is 39.9 percent, the equipment will be sold in 3 years for $98, 800.00, and the equipment will be depreciated to $72, 600.00 over 12 years using straight - line depreciation? $106, 885.74 (plus or minus $10) $262, 538.29 (plus or minus $10) - $72, 688.20 (plus or minus $10) $230,867.00 (plus or minus $10) None of the above is within $10 of the correct answer
New equipment costs $10 million. The equipment will be depreciated straight line over 5 year to a value of zero, but in fact it will be sold after 4 years for $3,000,000. The firm's tax rate is 40%. What is the after-tax cash flow from the sale of the equipment? excel
Yang is considering buying an asset that, starting 5 years from now, will pay $10,000 per year forever. Assume that the required return is 7.25%. What is the most Yang should pay for this asset?

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