Depreciation , whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation. To determine: The annual depreciation using MACR.

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Answer 1

Question

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

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Scenario one: Under what circumstances would it be appropriate for a firm to use different cost of capital for its different operating divisions? If the overall firm WACC was used as the hurdle rate for all divisions, would the riskier division or the more conservative divisions tend to get most of the investment projects? Why? If you were to try to estimate the appropriate cost of capital for different divisions, what problems might you encounter? What are two techniques you could use to develop a rough estimate for each division’s cost of capital?

Scenario three: If a portfolio has a positive investment in every asset, can the expected return on a portfolio be greater than that of every asset in the portfolio? Can it be less than that of every asset in the portfolio? If you answer yes to one of both of these questions, explain and give an example for your answer(s). Please Provide a Reference

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Answer 2

Question

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

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Answer 3

Question

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

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Answer 4

Question

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

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Answer 5

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

Answer 6

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

Answer 7

Chapter 11.A, Problem 2MC

a)

Summary Introduction

Case summary:

Depreciation, whereas a cost, isn't a cash stream thing. Be that as it may, depreciation cost brings down the firm’s assessable pay, which in turn decreases the firm’s charge obligation and increments its cash stream. All through our computations in Chapter 11, we utilized reward depreciation, which is an extraordinary frame of quickened depreciation where all the deterioration is taken quickly. With the MACRS strategy depreciation is still quickened and is spread over the life of the resource. The advantage of faster depreciation is that you just end up with more depreciation costs (a noncash item) within the prior a long time and fewer deterioration costs within the last-mentioned years—and with bonus deterioration, all the deterioration comes in year 1. As a result, you have got less taxable profits within the early a long time and more assessable benefits within the afterward a long time. This decreases charges within the prior a long time when the display values are most prominent whereas expanding charges within the afterward a long time when the display values are littler. Most enterprises get ready two sets of books, one for computing taxes for the IRS in which they utilize quickened depreciation and one for their shareholders in which they utilize straight-line depreciation.

To determine: The annual depreciation using MACR.

Answer 8

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

Answer 9

b)

Summary Introduction

To determine: The assumption when asset bought within the year.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 11.A - Prob. 1MC Ch. 11.A - Prob. 2MC Ch. 11 - Prob. 1RQ Ch. 11 - Prob. 2RQ Ch. 11 - If a project requires an additional investment in...Ch. 11 - Prob. 4RQ Ch. 11 - Prob. 5RQ Ch. 11 - Prob. 6RQ Ch. 11 - Prob. 1SP Ch. 11 - (Relevant cash flows) Captins Cereal is...

Solution Summary: The author explains that depreciation isn't a cash stream thing. It brings down the firm's assessable pay, which in turn decreases its charge obligation.

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To determine: The assumption when asset bought within the year.

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