In year 1, Firm A paid $50,000 cash to purchase a tangible business asset. In year...
In year 1, Firm A paid $50,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,140 and $7,200 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Now assume that Firm A borrowed $50,000 to purchase the asset. In each year, it paid $3,800 annual interest on the debt. The interest payments were deductible.
How does this change in facts affect Firm A’s net cash flow attributable to the asset purchase in each year?
Year 1 Year 2
Total cash flows before tax:
Total tax (cost) or savings:
Net Cash Flow:
How does this change in facts affect Firm A’s adjusted basis in the asset at the end of each year: either increase, decrease, or no effect
Homework Answers
Request Answer!
We need at least 10 more requests to produce the answer.
0 / 10 have requested this problem solution
The more requests, the faster the answer.
Add Answer to:
In year 1, Firm A paid $50,000 cash to purchase a tangible
business asset. In year...
In year 1. Fim A paid $58,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $...
In year 1. Fim A paid $58,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,620 and $8,000 depreciation with respect to the asset. Firm A's marginal tax rate in both years was 21 percent. a. Compute Firm A's net cash flow attributable to the asset purchase in each year. b. Compute Firm A's adjusted basis in the asset at the end of each year. Complete this question by entering your answers in...
PART 1: Assume $50,000 is paid for an asset in present time that yields annual cash...
PART 1: Assume $50,000 is paid for an asset in present time that yields annual cash flow of $6,000 dollars per year in Years 1 through 10, as shown in the table below. At the end of Year 10 the salvage value of the asset is $40,000. Calculate the rate of return on this investment. (In other words, find the value of the interest rate i that makes the Net Present Value of the investment equal to zero - this...
In the current year, a company paid interest of $50,000, had net capital expenditures of $300,000,...
In the current year, a company paid interest of $50,000, had net capital expenditures of $300,000, and issued net new debt of $90,000. In addition, the company reported cash flow from operating activities of $500,000, cash flow from investing activities of ($350,000), and cash flow from financing activities of $165,000. The marginal tax rate is 30%. Compute the free cash flow to the equity holders. a)$235,000 b) $250,000 c) $290,000 d) $835,000
Depreciation and accounting cash flow A firm in the third year of depreciating its only asset,...
Depreciation and accounting cash flow A firm in the third year of depreciating its only asset, which originally cost $ 187,000 and has a 5-year MACRS recovery period , has gathered the following data relative to the current year's operations: Accruals $ 15,600 Current assets 119,000 Interest expense 15,900 Sales revenue 414,000 Inventory 70,500 Total costs before depreciation, interest and taxes 285,000 Tax rate on ordinary income 21 % a. Use the relevant data to determine the operating cash flow...
Alvie Heating & Air experienced the following events during Year 2: Acquired $50,000 cash from the...
Alvie Heating & Air experienced the following events during Year 2: Acquired $50,000 cash from the issue of common stock Paid $20,000 cash to purchase land Borrowed $40,000 cash Provided services for $60,000 cash Paid $12,000 cash for rent expense Paid $18,000 cash for other operating expenses Paid 10% interest on the Note Payable. Paid a $5,000 cash dividend to the stockholders Determined that the market value of the land purchased in Event 2 is now $16,500 The January 1,...
Some extracts from the cash flow statement of Trackball plc are included below for the year...
Some extracts from the cash flow statement of Trackball plc are included below for the year to 30th June 20x6. Group cash flow statement 20x6 20x5 £m £m Operating activities Cash generated from operations 612.9 550.4 Interest paid (82.5) (71.7) Tax paid (43.2) (88.2) Net cash from operating activities 487.2 390.5 Investing activities Purchase of tangible fixed assets (401.7) (374.0) Sale of tangible fixed assets 264.0 118.9 Purchase of shares in other companies (1,175.1) Interest received 4.1 3.0 Net cash...
1. A firm has interest expense for the year of $400 and cash flow to creditors...
1. A firm has interest expense for the year of $400 and cash flow to creditors of negative $250 (CFC -$250). The firm paid off $100 of old debt over the year. How much must it have borrowed over the same year?
At the start of the current financial year Paul decided to purchase a newly constructed apartment...
At the start of the current financial year Paul decided to purchase a newly constructed apartment in the city for $400,000 which he hopes will increase his long-term wealth and create some tax deductions given that he is on a 46.5% marginal tax rate. He used $80,000 of his own money as a deposit and borrowed the remaining $320,000 from Fast Finance on an interest-only loan for 5 years at a fixed interest rate of 7% p.a.. Some additional details...
Question #1 a) A firm has an asset with a market value of $20,000 and a...
Question #1 a) A firm has an asset with a market value of $20,000 and a book value of $30,000. If its marginal tax rate is 25%, what will the net proceeds from selling the asset be? b) A firm has an asset with a market value of $10,000 and a book value of $4,000. If its marginal tax rate is 25%, what will the net proceeds from selling the asset be? Question #2 A firm believes it can generate...
On January 1, Year 2, Shapiro Company paid $70,000 cash to purchase a truck. The truck...
On January 1, Year 2, Shapiro Company paid $70,000 cash to purchase a truck. The truck has a $10,000 salvage value and a five-year useful life. Assume that Shapiro earns $18,000 of cash revenue per year for Year 1 through Year 5 of the assets useful life. Shapiro began Year 2 with a beginning cash balance of $110,000. Required a. Determine the amount of net income for Year 2, Year 3, and Year 4. b. Determine the amount of accumulated...
In year 1. Fim A paid $58,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,620 and $8,000 depreciation with respect to the asset. Firm A's marginal tax rate in both years was 21 percent. a. Compute Firm A's net cash flow attributable to the asset purchase in each year. b. Compute Firm A's adjusted basis in the asset at the end of each year. Complete this question by entering your answers in...
1. A firm has interest expense for the year of $400 and cash flow to creditors of negative $250 (CFC -$250). The firm paid off $100 of old debt over the year. How much must it have borrowed over the same year?
On January 1, Year 2, Shapiro Company paid $70,000 cash to purchase a truck. The truck has a $10,000 salvage value and a five-year useful life. Assume that Shapiro earns $18,000 of cash revenue per year for Year 1 through Year 5 of the assets useful life. Shapiro began Year 2 with a beginning cash balance of $110,000. Required a. Determine the amount of net income for Year 2, Year 3, and Year 4. b. Determine the amount of accumulated...
Most questions answered within 3 hours.
-
a) Write a verilog module for 1:4 Demultiplexer using verilog
primitives.
b) Design 1-to-4 DEMUX using...
asked 1 minute from now -
The random variable X is exponentially distributed, where X
represents the time it takes for a...
asked 3 minutes ago -
MATLAB
write a MATLAB function (1) output a third-order polynomial
function with the coefficients as the...
asked 11 minutes ago -
A z-score
communicates a raw score’s "relative standing"
under the normal curve in relation to:
asked 19 minutes ago -
An object is vibrating on a spring with the following equation
of motion:
?=(30 ??)cos((2?)/(160)?)
a)...
asked 19 minutes ago -
Vulcan Flyovers offers scenic overflights of Mount St. Helens,
the volcano in Washington State that explosively...
asked 21 minutes ago -
If organizations do not adapt fast enough and move incrementally
from the twentieth-century model to the...
asked 22 minutes ago -
A helium balloon with 2.5L of gas has a gauge pressure of 10,000
Pa. The balloon...
asked 26 minutes ago -
What is responsible for Jupiter's enormous magnetic field?
asked 41 minutes ago -
At the end of the year, a company offered to buy 5,000 units of
a product...
asked 43 minutes ago -
Implement C++ program for each of the following.
Let D = [-48, -14, -8, 0, 1,...
asked 1 hour ago -
Consider a labor market in which LD = 400 – 4W and LS = 250 +...
asked 1 hour ago