Homework Answers
ANSWER:
Answer is The firm's net cash flows would increase.
Explanation:
The net cash flows will increase following the year in which the change happens. This is due to the fact that more tax shield will be available for the firm after an increase in depreciation.
Add Answer to:
A start-up firm is making an initial investment in new plant and equipment. Assume that currently...
A start-up firm is making an initial investment in new plant and equipment. Assume that currently...
A start-up firm is making an initial investment in new plant and equipment. Assume that currently its equipment must be depreciated on a straight-line basis over 10 years, but Congress is considering legislation that would require the firm to depreciate the equipment over 7 years. If the legislation becomes law, which of the following would occur in the year following the change? Select one: a. The firm’s operating income (EBIT) would increase. b. The firm’s tax payments would increase. c....
Company Z is making an investment in a new plant and equipment. They had originally expected...
Company Z is making an investment in a new plant and equipment. They had originally expected to depreciate the assets over a 10-year basis, but then found that they could depreciate over 7 years instead (thereby increasing the amount depreciated each year). If Company Z depreciates over 7 years, which of the following would occur? a. The firm's operating income (EBIT) would increase. b. The firm's taxable income would increase. c. The firm's reported net income would increase. d. The...
Greer Law Associates is evaluating a capital investment proposal for new office equipment for the current...
Greer Law Associates is evaluating a capital investment proposal for new office equipment for the current year. The initial investment would require the firm to spend $50,000. The equipment would be depreciated on a straight-line basis over five years with no salvage value. The firm's accountant has estimated the before-tax annual cash inflow from the investment to be $15,000. The income tax rate is 40 percent, and all taxes are paid in the year that the related cash flows occur....
34. Assume that Pappas Company commenced operations on January 1, 2007, and it was granted permission...
34. Assume that Pappas Company commenced operations on January 1, 2007, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 15 years, but in December 2007 management realized that the assets would last for only 10 years. The firm's accountants plan to report the 2007 financial statements based on this new information. How would the new depreciation assumption statements? a. b. affect...
HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm...
HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm is looking to expand its operations by 10% of the firm's net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm's balance sheet.) The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and...
HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm...
HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm is looking to expand its operations by 10% of the firm's net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm's balance sheet.) The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and...
The initial investment in Plant and Equipment will be $175,000. The equipment will be depreciated on...
The initial investment in Plant and Equipment will be $175,000. The equipment will be depreciated on a straight-line basis over 5 years with no expected salvage value. The project will also require an initial investment in net working capital of $30,000 which the company will recover at the end of the 5 year period. Sales are forecast to be $220,000 each year, with cash operating expenses of $90,000. The company tax rate is 30%, and their weighted average cost of...
In Capsim, investment in plant & equipment (including automation) is depreciated on a straight line basis...
In Capsim, investment in plant & equipment (including automation) is depreciated on a straight line basis over 15 years. Imagine the firm you inherited has 1st shift capacity of 2,000,000 units at an automation level of 5. The original cost of this capacity was $52 million. Because the machines are 8 years old, 8/15 of the value has been depreciated. Because you only currently sell 1,200,000 units per year, you decide to sell 800,000 units. Selling capacity recoups 65% of...
CSC is evaluating a new project to produce encapsulators. The initial investment in plant and equipment...
CSC is evaluating a new project to produce encapsulators. The initial investment in plant and equipment is $500,000. Sales of encapsulators in year 1 are forecasted at $200,000 and costs at $100,000. Both are expected to increase by 10% a year in line with inflation. Profits are taxed at 35%. Working capital in each year consists of inventories of raw materials and is forecasted at 20% of sales in the following year. The project will last five years and the...
A firm is considering a new project that will generate cash revenue of $1,300,000 and cash expens...
Urgent!!! Please answer within one hour.
A firm is considering a new project that will generate cash revenue of $1,300,000 and cash expenses of $750,000 per year for five years. The equipment necessary for the project will cost $250,000 and will be depreciated straight line over four years. What is the expected free cash flow in the second year of the project if the firm's marginal tax rate is 35%? O A. $455.250 B. $316,875 O C. $341,438 O D....
Greer Law Associates is evaluating a capital investment proposal for new office equipment for the current year. The initial investment would require the firm to spend $50,000. The equipment would be depreciated on a straight-line basis over five years with no salvage value. The firm's accountant has estimated the before-tax annual cash inflow from the investment to be $15,000. The income tax rate is 40 percent, and all taxes are paid in the year that the related cash flows occur....
34. Assume that Pappas Company commenced operations on January 1, 2007, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 15 years, but in December 2007 management realized that the assets would last for only 10 years. The firm's accountants plan to report the 2007 financial statements based on this new information. How would the new depreciation assumption statements? a. b. affect...
In Capsim, investment in plant & equipment (including automation) is depreciated on a straight line basis over 15 years. Imagine the firm you inherited has 1st shift capacity of 2,000,000 units at an automation level of 5. The original cost of this capacity was $52 million. Because the machines are 8 years old, 8/15 of the value has been depreciated. Because you only currently sell 1,200,000 units per year, you decide to sell 800,000 units. Selling capacity recoups 65% of...
Urgent!!! Please answer within one hour.
A firm is considering a new project that will generate cash revenue of $1,300,000 and cash expenses of $750,000 per year for five years. The equipment necessary for the project will cost $250,000 and will be depreciated straight line over four years. What is the expected free cash flow in the second year of the project if the firm's marginal tax rate is 35%? O A. $455.250 B. $316,875 O C. $341,438 O D....
Most questions answered within 3 hours.
-
In C++ Programming, Try using loops only.
This lab demonstrates the use of the While Loop...
asked 20 minutes ago -
Effect of DCMU and sodium azide on Chlamydomonas? We did an
experiment where we had Chlamydomonas...
asked 59 minutes ago -
1a) According to the ideal gas law, _______________.
a. a gas has infinite volume at absolute...
asked 2 hours ago -
Oakdale Fashions, Inc. had $245,000 in 2018 taxable income.
Using the tax schedule in Table 2.3...
asked 2 hours ago -
The marketing class at CSUS had an average score of 150. An
educational analyst determined that...
asked 4 hours ago -
Justin Case has purchased a $250 000 home by putting 20 % down
and taking out...
asked 4 hours ago -
1. In a labor market, marginal cost for a firm is
____________.
a. recruiting cost
b....
asked 4 hours ago -
On January 1, 2019, ABC Company issued $60,000,000 of 20-year,
10.5% bonds when the market rate...
asked 5 hours ago -
39.4% of US homes continue to use a landline in addition to cell
phone service. 3...
asked 5 hours ago -
Starting with benzene, synthesize 1-phenyl-1-butyne.
Show intermediates and reagents.
asked 6 hours ago -
Create a 32-run crossed array design with six control factors
and two noise factors such that...
asked 7 hours ago -
A 500g sample of sand from source A has the following amounts
retained on each sieve....
asked 7 hours ago