Please remember to round your answer to two decimal places.
Problem 11-03 Net Salvage Value
Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $20 million, of which 85% has been depreciated. The used equipment can be sold today for $6 million, and its tax rate is 30%. What is the equipment's after-tax net salvage value? Write out your answer completely. For example, 2 million should be entered as 2,000,000.
$________
Problem 11-06 New-Project Analysis
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,010,000, and it would cost another $17,500 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $677,000. The machine would require an increase in net working capital (inventory) of $20,000. The sprayer would not change revenues, but it is expected to save the firm $378,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 30%.
Year 1 | $_____ |
Year 2 | $_____ |
Year 3 | $_____ |
Problem 12-01 AFN equation
Broussard Skateboard's sales are expected to increase by 20% from $8.0 million in 2016 to $9.60 million in 2017. Its assets totaled $5 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 7%, and the forecasted payout ratio is 60%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar. Do not round intermediate calculations.
$__________
Problem 12-02 AFN equation
Broussard Skateboard's sales are expected to increase by 15%
from $7.0 million in 2016 to $8.05 million in 2017. Its assets
totaled $4 million at the end of 2016. Broussard is already at full
capacity, so its assets must grow at the same rate as projected
sales. At the end of 2016, current liabilities were $1.4 million,
consisting of $450,000 of accounts payable, $500,000 of notes
payable, and $450,000 of accruals. The after-tax profit margin is
forecasted to be 7%, and the forecasted payout ratio is 60%. What
would be the additional funds needed? Do not round intermediate
calculations. Round your answer to the nearest dollar.
$_______________
Assume that an otherwise identical firm had $5 million in total assets at the end of 2016. Broussard's capital intensity ratio (A0*/S0) is __________ (higher than / lower than / equal to) than the otherwise identical firm; therefore, Broussard is __________ (less / more / the same) capital intensive - it would require __________ (a smaller / a larger / the same) increase in total assets to support the increase in sales.
Please remember to round your answer to two decimal places.
Answer:
Question 11.03)
given
Original cost=$20 million
depreciated =85%
Accumulated depreciation =85%*20=$17 million
Actual salvage value=20-17=$ 3 million
Resell rate=$ 6 million
Taxable income=6-3=$3 million
Tax=30%*3=$0.9 million
After tax salvage value =6-0.9=$5.1 million
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