You work for Tamimi Industries, which purchased robotics equipment for $500,000 sixyears ago. The equipment is in place today and has a total 10-year useful life, no salvagevalue, and a 5-year MACRS recovery period. The effective tax rate is 21% and the actualcash flow and depreciation amounts are shown.GI, S250,000280,000200,000260,000260,000180,000Expenses, $|-120,000-120,000F122,000-124,000-126,000128,000Depreciation, $100,000160,00096,00057,60057,60028,800Year131456EBIT is calculated for years 1 to nand includes the Por Samounts.True or FalseTrueFalse

Earnings before interest and taxes: During an accounting period, the operating income earned by an…

Answered: You work for Tamimi Industries, which…

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

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Vandezande Incorporated is considering the acquisition of a new machine that costs $470,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (ignore Income taxes.): Year 1 Year 2 Year 3 Year 4 Year 5 Incremental Net Operating Income $ 78,000 $ 84,000 $ 95,000 $ 58,000 $ 100,000 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period of this investment is closest to: (Round your answer to 1 decimal place.) Multiple Choice 4.1 years 5.0 years 2.9 years Incremental Net Cash Flows $ 156,000 $ 163,000 $ 175,000 $ 160,000 $ 162,000 21 years
. A manufacturing company purchased a new machine costing $500,000 now (year 0). The machine to be used for welding is depreciated at a 30% declining balance rate for tax purposes. If the machine is to be sold after seven years,compute the amounts of gains (losses) and the disposal tax effect for the following three salvage values with a corporate tax rate of 35%. a) $ 30,000 b) $175,000 c) $525,000
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A warehouse was purchased for $9MM ($2MM down +$7MM loan) 5 years ago and is recently sold for $10.1MM gross sales price. Assume the following: 27% of the purchase price was attributable to land value • the current mortgage balance is $6.1MM • 25% tax rate on accumulated depreciation • 15% tax rate on capital gain. • 5% selling cost. What is the tax due on depreciation recapture at sale?
K One year ago, your company purchased a machine used in manufacturing for $110,000. You have learned that a new machine is available that offers many advantages; you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over 10 years, after which it has no salvage value. You expect that the new machine will contribute EBITDA (earnings before interest, taxes, depreciation, and amortization) of $50,000 per year for the next 10 years. The current machine is expected to produce EBITDA of $22,000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, after which it will have no salvage value, so depreciation expense for the current machine is $10,000.00 per year. All other expenses of the two machines are identical. The market value today of the current machine is $50,000. Your company's tax rate is 35%, and the opportunity cost of capital for this type of equipment is 12%. Is it profitable to replace the…
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A new piece of equipment costs $500,000, and depreciated according to the 5 year MACRS schedule. Assume the equipment makes you earn 350,000 a year more, and increases the operating expenses by $100,000 annually. Assume a federal applicable tax rate of 32%. For year 2, calculate: (a) before tax cash flow (BTCF) (b) taxable income (c) taxes due (d) after tax cash flow (ATCF)
Suppose Hampton Corporation sells land for $8,000,000. Hampton paid $5,000,000 for the land several years ago. Assuming a marginal tax rate of 34%, calculate the after-tax cash flow resulting from the land sale.
You buy a piece of equipment for $2,000 and depreciate it over time to $500. You then sell the equipment for $700. Assuming a tax rate of 40%, your net cash proceeds from the sale is: $700 $500 620 $420

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