Question

Please solve, show work, and give detail explanationExam #2 Review Problems Chapters 9 and 6 2. A firm has a new project that requires $210,600 of equipment. What is the depreci

0 0
Add a comment Improve this question Transcribed image text
Answer #1

2.

Cost of equipment = 210600

MACRS Depreciation rate for the 5th year = 8.93%

Depreciation for the 5th year = 210600 * 8.93% = 18806.58

3.

Calculation of depreciation

Cost of equipment 16400
Number of years 4
book value after 4 year 2800
Amount to be depreciated (16400-2800) 13600
Depreciation per year (13600/4) 3400

Calculation of Profit on sale of equipment

Sale price of equipment 4500
Book value of equipment 2800
Profit on sale (4500-2800) 1700

Calculation of tax in year 4

Operating cash flow 33000
less: depreciation 3400
add: profit on sale of asset 1700
Taxable Income (33000-3400+1700) 31300
Tax @ 35% (31300 * 35%) 10955

Cash Flow for year 4

Operating cash flow 33000
add : Sale of equipment 4500
less ; tax payable 10955
After tax Cash flow (33000+4500-10955) 26545
Add: working capital release 5600
Cash flow for year 4 (26545 + 5600) 32145
Add a comment
Know the answer?
Add Answer to:
Please solve, show work, and give detail explanation Exam #2 Review Problems Chapters 9 and 6...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Please solve, show work, and give detail explanation Exam #2 Review Problems Chapters 9 and 6...

    Please solve, show work, and give detail explanation Exam #2 Review Problems Chapters 9 and 6 10. If you dispose of an asset and its book value is greater than its salvage value, then you will have to pay taxes on the difference between the book value and salvage value. a. True b. False 11. Long-term bonds have more interest rate risk than do short-term bonds. a. True b. False 12. Bondholders demand an inflation premium to compensation them for...

  • TISA Corp. is looking for a project that has annual forecasted sales of $1,000,000. The variable...

    TISA Corp. is looking for a project that has annual forecasted sales of $1,000,000. The variable production costs are 60% of sales. The project lasts ten years. The equipment needed for the project costs $500,000, will be depreciated using MACRS method and has a 5-year MACRS classification (table below). There are no other costs. The tax rate is 30% Year 3-year 5-year 7-year 10-year 1 33.33 20.00 14.29 10.00 2 44.45 32.00 24.49 18.00 3 14.81 19.20 17.49 14.40 4...

  • A company is considering a 5-year project to expand production with the purchase of a new...

    A company is considering a 5-year project to expand production with the purchase of a new automated machine using the latest technology. The new machine would cost $160,000 FOB St. Louis, with a shipping cost of $7,000 to the plant location. Installation expenses of $15,000 would also be required. This new machine would be classified as 7-year property for MACRS depreciation purposes. The project engineers anticipate that this equipment could be sold for salvage for $43,000 at the end of...

  • A company is considering a 5-year project to expand production with the purchase of a new...

    A company is considering a 5-year project to expand production with the purchase of a new automated machine using the latest technology. The new machine would cost $220,000 FOB St. Louis, with a shipping cost of $8,000 to the plant location. Installation expenses of $14,000 would also be required. This new machine would be classified as 7-year property for MACRS depreciation purposes. The project engineers anticipate that this equipment could be sold for salvage for $38,000 at the end of...

  • SITA Corp. is looking for a project that has annual forecasted sales of $1,000,000. The variable...

    SITA Corp. is looking for a project that has annual forecasted sales of $1,000,000. The variable production costs are 60% of sales. The project lasts 10 years. The equipment needed for the project costs $500,000, will be depreciated using MACRS method and has a 5-year MACRS classification (table below). There are no other costs. The tax rate is 20%. Year 3-Year 33.33% 44.45% 14.81% 7.41% 5-Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% RBO VOU AWN 7-Year 14.29% 24.49% 17.49% 12.49%...

  • SITA Corp. is looking for a project that has annual forecasted sales of $400,000. The variable...

    SITA Corp. is looking for a project that has annual forecasted sales of $400,000. The variable production costs are 60% of sales. The project lasts 10 years. The equipment needed for the project costs $300,000, will be depreciated using MACRS method and has a 5-year MACRS classification (table below). There are no other costs. The tax rate is 20%. Year 1 3-Year 33.33% 44.45% 14.81% 7.41% ovanown 5-Year 7-Year 20.00% 14.29% 32.00% 24.49% 19.20% 17.49% 11.52% 12.49% 11.52% 8.93% 5.76%...

  • TISA Corp. is looking for a project that has annual forecasted sales of $1,000,000. The variable...

    TISA Corp. is looking for a project that has annual forecasted sales of $1,000,000. The variable production costs are 70% of sales. The project lasts 10 years. The equipment needed for the project costs $500,000, will be depreciated using MACRS method and has a 5-year MACRS classification (table below). There are no other costs. The tax rate is 30%. Year 3-Year 33.33% 44.45% 14.81% 7.41% 5-Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 7-Year 10-Year 14.29% 10.00% 24.49% 18.00% 17.49% 14.40%...

  • ABC Company purchased $50701 of equipment 4 years ago. The equipment is 7-year MACRS property. The...

    ABC Company purchased $50701 of equipment 4 years ago. The equipment is 7-year MACRS property. The firm is selling this equipment today for $4916. What is the After-tax Salvage Value if the tax rate is 20%? The MACRS allowance percentages are as follows, commencing with year one: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent.

  • Great Western Southern purchased $525,000 of equipment four years ago. The equipment is seven-year MACRS property. The f...

    Great Western Southern purchased $525,000 of equipment four years ago. The equipment is seven-year MACRS property. The firm is selling this equipment today for $150,000. What is the after-tax cash flow from this sale if the tax rate is 27 percent? The MACRS allowance percentages are as follows, commencing with Year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Please explain your answer.

  • Nashville Wedding Party Downtown Traffic Cloggers purchased $525,000 of equipment four years ago. The equipment is...

    Nashville Wedding Party Downtown Traffic Cloggers purchased $525,000 of equipment four years ago. The equipment is seven-year MACRS property. The firm is selling this equipment today for $150,000. What is the aftertax cash flow from this sale if the tax rate is 27 percent? The MACRS allowance percentages are as follows, commencing with Year 1: 14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. Multiple Choice Ο $ 152,941.10 Ο $147,057.90 Ο $168,825.81 Ο $166,712.33 Ο $143,096.78

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT