Your company has sales of $106,400 this year and cost of goods sold of $62.900. You forecast sales to increase to $114,600 next year. Using the percent of sales method, forecast next year's costof goods soldThe Tax Outs and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures) However, we will still include depreciation forecasting in this chapter andin these problems in anticipation of the return of standard depreciation practices during your careerThe forecasted cost of goods sold (COGS) is (Round to the nearest dollar)

Sales Less variable cost is cost of goods sold Whereas cost of goods sold as a percentage of sales…

Answered: Your company has sales of $106,400 this…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for years 1 and 2? a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) Calculate the incremental earnings of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) Sales Operating Expenses Depreciation EBIT Income tax at 21% Unlevered Net Income Year 1 Year 2 $ $ SA $ 69 $ GA 67 69 $ $ $ 6969 $ $ SA
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment Answer is complete but not entirely correct. a. Total value b. Laputa's equity $ 70 30 $ 40 12 9 428 257 X Year 2 $90 40 50 15 12 3 $105 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40 % by debt. Its cost of equity is 11%, its debt yields 7%, and it pays corporate tax at 30%. 45 60 a. Estimate the company's total value.. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.…
As a company, to minimize the present worth of taxes paid to the federal government, use longest MACRS recovery period. true or false?
A new project will generate sales of $97 million, costs of $49 million, and depreciation expense of $10 million in the coming year. The firm's tax rate is 27%. Calculate cash flow for the year (you may use any of the three methods discussed in the chapter 9 -- if done correctly, they should all provide the same answer). (Answer in $ Million, e.g. 10.5 is $10.5 million)
Under the assumption that KMS's market share will increase by 0.22% per year, you determine that the plant will require an expansion in 2015, KMS's current outstanding debt, the interest on the debt, and the interest tax shield are given in the table below. The expansion will cost $21.8 million. Assuming that the financing of the expansion will be delayed accordingly (end of 2015) calculate the projected interest payments and the amount of the projected interest tax shields (assuming that KMS still uses a 10-year bond, interest rates remain the same at 7.1%, and KMS's tax rate is 35%) through 2018. Current values (5000) Outstanding debt before expansion Interest on debt before expansion Interest Tax Shield before expansion 2013 $4,447 $316 $111 2014 $4,447 $316 $111 2015 $4,447 $316 $111 2016 $4,447 $316 $111 The total projected interest payments beginning in 2015 will be $ (Round to the nearest dollar) 2017 $4,447 $316 $111 2018 $4,447 $316 $111
Suppose you sell a fixed asset for $115,000 when it's book value is $135,000. If your company's marginal tax rate is 21%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?
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