The before-tax payback periods.

Question

Want to see the full answer?

Answer 1

Question

Chapter 12, Problem 55P

(a)

To determine

To find: The before-tax payback periods.

(b)

To determine

To find: The after-tax payback period and after-tax rate of return.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

A firm must decide between two designs. Their effective income tax rate is 33%, and MACRS depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen? Design B $2,040,000 $1,150,000 Design A $940,000 $910,000 Capital investment MV at end of useful life $260,000 5 years Annual revenues less expenses $410,000 MACRS property class Useful life 5 years 6 years 7 years Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. Calculate the AW value for the Design A. AWA(12%) = $ (Round to the nearest dollar.) Calculate the AW value for the Design B. AWg(12%) = $ (Round to the nearest dollar.) Based on the AW values, should be chosen.

MUST USE ONLY EXCEL SPREADSHEET FOR THIS PROBLEM A corporation with $7 million in annual taxable income and no state tax is considering two alternatives: Year 0 1-10 11-20 Before-Tax Cash Flow ($1000) Alt 1 Alt 2 -10,000 4,500 0 -20,000 4,500 4,500 Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of 10% after taxes, which alternative should it choose? Solve the problem by: (a) Present worth analysis (b) Annual cash flow analysis (c) Rate of return analysis (d) Future worth analysis (e) Benefit-cost ratio analysis

Machinery for an assembly line has a cost basis of $150,000 and an expected salvage of $25,000. It is not subject to special limitations for bonus depreciation. How much bonus depreciation was, is, or will be allowed (a) in 2014? (b) in 2018? (c) in 2024? (d) in 2026?