Below is a list of aspects of various capital expenditure proposals that the capital budgeting team...
After-Tax Cash Flows Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Anchor, Inc., has incorporated into its net present value analyses during the past year. Unless otherwise noted, the items listed are unrelated to each other. All situations assume a 40% income tax rate and an 11% minimum desired rate of return. 1. Pre-tax savings of $4,000 in cash expenses will occur in each of the next three years. 2. A...
After Tax Cash Flows Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Anchor, Inc., has incorporated into its net present value analyses during the past year. Unless otherwise noted, the items listed are unrelated to each other. Al situations assume a 40% income tax rate and an 11% minimum desired rate of retum 1. Pre-tax Savings of $4,000 in cash expenses will occur in each of the next three years 2....
After-Tax Cash Flows Below is a list of aspects of various capital expenditure proposals that the capital budgeting team of Modern Systems, Inc., has incorporated into its net present value analyses during the past year. Unless otherwise noted, the items listed are unrelated to each other. All situations assume a 30% income tax rate and a 10% minimum desired rate of return. 1. Pre-tax savings of $5,000 in cash expenses will occur in each of the next three years. 2....
Warren Company plans to open a new repair service center for one of its electronic products. The center requires an investment in depreciable assets costing $420,000. The assets will be depreciated on a straight-line basis, over four years, and have no expected salvage value. The annual income statement for the center is given below. Revenues $350,000 Less: Cash operating expenses (140,000) Depreciation (105,000) Income before income taxes $105,000 Less: Income taxes (@40%) 42,000 Net income $63,000 Required: 1. Using the...
After-Tax Cash Flows Warren Company plans to open a new repair service center for one of its electronic products. The center requires an investment in depreciable assets costing $480,000. The assets will be depreciated on a straight-line basis, over four years, and have no expected salvage value. The annual income statement for the center is given below. Revenues $360,000 Less: Cash operating expenses (150,000) Depreciation (120,000) Income before income taxes $90,000 Less: Income taxes (@40%) 36,000 Net income $54,000 Required:...
Rockyford Company must replace some machinery that has zero book value and a current market value of $4,200. One possibility is to invest in new machinery costing $47,000. This new machinery would produce estimated annual pretax cash operating savings of $18,800. Assume the new machine will have a useful life of 4 years and depreciation of $11,750 each year for book and tax purposes. It will have no salvage value at the end of 4 years. The investment in this...
The Gabriel Co. is considering a 7-year project that would require a cash outlay of $140,000 for machinery and an additional $30,000 for working capital that would be released at the end of the project. The equipment would be depreciated evenly over the 7 years and have a salvage value of $ 7,000 at the end of 7 years. The project would generate before tax annual cash inflows of $41,500. The tax rate is 20% and the company's discount rate...
Rockyford Company must replace some machinery that has zero book value and a current market value of $2,400. One possibility is to invest in new machinery costing $46,000. This new machinery would produce estimated annual pretax cash operating savings of $18,400. Assume the new machine will have a useful life of 4 years and depreciation of $11,500 each year for book and tax purposes. It will have no salvage value at the end of 4 years. The investment in this...
Check my work Rockyford Company must replace some machinery that has zero book value and a current market value of $1,400. One possibility is to invest in new machinery costing $36,000. This new machinery would produce estimated annual pretax cash operating savings of $14,400. Assume the new machine will have a useful life of 4 years and depreciation of $9,000 each year for book and tax purposes. It will have no salvage value at the end of 4 years. The...
2. A tool costing $ 30000 has no salvage value. Its cash flow before tax is shown below. Year BTCF SOYD Depreciation Taxable income Taxes ATCF - 30000 +10000 +15000 +20000 The tool must be depreciated over 3 years according to SOYD method. The tax rate is 35% a) Fill in the remaining four columns in the Table. b) What is the after tax rate of return?