Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent. Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.) Depreciation tax shield

Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent. Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.) Depreciation tax shield

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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your company is considering a new project that will require $10,000 of new equipment at the start of the project. T he equipment will have a depreciable life of five years and will be depreciated to a book value of $3000 using straight line depreciation. the cost of capital is 9 percent and the firm tax rate is 21 percent. estimate the present value of the tax benifits frm depreciation.
Hello. Need help with the solution to question. Calculate the annual straight-line depreciation for a machine that costs $30,000 and has installation and shipping costs that total $2,000. The machine will be depreciated over a period of 15 years. The company’s marginal tax rate is 40 percent. Round your answer to the nearest dollar.
Acefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of$670,000at the end of the project's and assets ten year life. Ace's marginal tax rate is32%. The firm will have to pay$8,047,675to buy the asset. You have estimated that they could sell the asset for$787,309to a Brazilian firm at the end of the project. Answer in dollars and cents.
Please show proper steps.
Consider an asset that costs $700,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $151,000. If the relevant tax rate is 23 percent, what is the aftertax cash flow from the sale of this asset? Aftertax salvage value=
Paulita's Products Inc. is considering the new piece of equipment that costs P75,000. The equipment is expected to generate revenues before-tax cash inflows of P25,000 per year for five year. The equipment would be depreciated using straight-line method over its five-year useful life. Upon retirement, the machine is expected to have a market value of P8,000. The company considers the maximum impact of income taxes in all of its capital investment decisions. The company has a 35 percent income tax rate and desires an after-tax return of 12 percent on its investment. The present value of 1, end of 5 years at 12% is 0.56743 and for ordinary annuity is 3.60478. The net present value of the equipment is: c. P 21,248 b. P 4,539 a. P 7,042 d. P 5,453
A road construction company is considering the purchase of a gravel hauler as it prepares for a new season of rural road construction. The hauler will cost $110,000, last six years with a salvage value of $20,000, and reduce annual maintenance, insurance, and labour costs by $30,000 per year. The after-tax MARR is 9% and the corporate tax rate is 55%. a. What is the exact after-tax IRR for this purchase? b. What is the approximate after-tax IRR for this purchase? c. Should the company buy the gravel hauler? Why or why not?
Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $70,000 before income taxes. The machine costs $244,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 30% income tax rate, and has an after-tax hurdle rate of 8 %. FV of $1 at FV of an ordinary annuity at PV of $1 at PV of an ordinary annuity at Yr .8% 8% 8% 8% 1 1.080 1.000 0.926 0.926 2 1.166 2.080 0.857 1.783 3 1.260 3.246 0.794 2.577 4 1.360 4.506 0.735 3.312 5 1.469 5.867 0.681 3.993 6 1.587 7.336 0.630 4.623 Required: If the machine's accounting rate of return on the initial investment is 6%. Compute the machine's net present value
Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will have zero book value, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 4-year life. What is the project's Year 4 cash flow? $65,000 Equipment cost (depreciable basis) Straight-line depreciation rate Sales revenues, each year Operating costs (excl. deprec.) Tax rate a. $27,500 b. $28,438 c. $22,750 d. $21,000 e. $30,333 33.33% $60,000 $25,000 35.0%
Your firm needs a computerized machine tool lathe which costs $50,000 and requires $12,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category, and neither bonus depreciation nor Section 179 expensing can be used. Assume a tax rate of 21 percent and a discount rate of 12 percent.Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.)
mani.5
Your facility is undergoing a major expansion, which will require significant capitalinvestment into new machinery. The total cost of the machinery will be $7.2 Million, and theywill be purchased outright immediately. This machinery is considered a 7-year MACRSasset. However, you expect to use it for only six years before selling it for $1.5 Million. What is the gains tax owed on the machinery sale at the end of year 6 if the tax rate is 21%? a. $45,108b. $169,692c. $315,000d. $0

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