BUS 225 DAYONE LL
17th Edition
ISBN: 9781264116430
Author: BLOCK
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 12, Problem 27P
The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS
The firm is in a 35 percent tax bracket and has an 8 percent cost of capital. Should it purchase the asset? Use the
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The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $450,000 and
the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12.
Year 1 $200,000
Year 2
263,000
90,000
80,000
Year 3
Year 4
The firm is in a 30 percent tax bracket and has a cost of capital of 12 percent. Use Appendix B for an approximate answer but calculate
your final answer using the formula and financial calculator methods.
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and round your answer to 2 decimal places.)
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Year 1
Year 2
Year 3
Year 4
$ 160,000
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68,000
The firm is in a 35 percent tax bracket and has a cost of capital of 9 percent. Use Appendix B for an approximate answer but calculate
your final answer using the formula and financial calculator methods.
a. Calculate the net present value.
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to
2 decimal places.
Net present value
b. Under the net present value method, should Summit Petroleum Corporation purchase the asset?
O Yes
O No
Your firm is considering a project that would require purchasing $7.5 million worth of new equipment.
Determine the present value of the depreciation tax shield associated with this equipment if the firm's
tax rate is 40%, the appropriate cost of capital is 8%, and the equipment can be depreciated Straight-
line over a five-year period, with the first deduction starting in one year. Please express the answer in
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Chapter 12 Solutions
BUS 225 DAYONE LL
Ch. 12 - Prob. 1DQCh. 12 - Why does capital budgeting rely on analysis of...Ch. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - What does the term mutually exclusive investments...Ch. 12 - Prob. 6DQCh. 12 - If a corporation has projects that will earn more...Ch. 12 - What is the net present value profile? What three...Ch. 12 - How does an asset’s ADR (asset depreciation...Ch. 12 - Assume a corporation has earnings before...
Ch. 12 - Assume a corporation has earnings before...Ch. 12 - Assume a firm has earnings before depreciation and...Ch. 12 - Assume a firm has earnings before depreciation and...Ch. 12 - Al Quick, the president of a New York Stock...Ch. 12 - Prob. 6PCh. 12 - Prob. 7PCh. 12 - Assume a 90,000 investment and the following cash...Ch. 12 - Prob. 9PCh. 12 - X-treme Vitamin Company is considering two...Ch. 12 - You buy a new piece of equipment for 16,230, and...Ch. 12 - Prob. 12PCh. 12 - Home Security Systems is analyzing the purchase of...Ch. 12 - Aerospace Dynamics will invest 110,000 in a...Ch. 12 - The Horizon Company will invest 60,000 in a...Ch. 12 - Skyline Corp. will invest 130,000 in a project...Ch. 12 - The Hudson Corporation makes an investment of ...Ch. 12 - The Pan American Bottling Co. is considering the...Ch. 12 - You are asked to evaluate the following two...Ch. 12 - Turner Video will invest 76,344 in a project. The...Ch. 12 - The Suboptimal Glass Company uses a process of...Ch. 12 - Keller Construction is considering two new...Ch. 12 - Davis Chili Company is considering an investment...Ch. 12 - Telstar Communications is going to purchase an...Ch. 12 - Assume 65,000 is going to be invested in each of...Ch. 12 - The Summit Petroleum Corporation will purchase an...Ch. 12 - Oregon Forest Products will acquire new equipment...Ch. 12 - Universal Electronics is considering the purchase...Ch. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Hercules Exercise Equipment Co. purchased a...Ch. 12 - Prob. 2WECh. 12 - Returning to TXN’s summary page, record the...
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