ZuoTi.Pro
Question

Trimble Lawn mowing bought a new mower for $10,000. The new mower will increase the annual...

Trimble Lawn mowing bought a new mower for $10,000. The new mower will increase the annual revenues by $50,000, and increase the operating costs by $20,000.   Trimble is using straight-line depreciation over a 5-year economic life. If the tax rate is 30%, please calculate the incremental after-tax cash inflow:

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Cash flow net of tax =(50000-20000)*(1-0.3) =21000

Depreciation tax shield =(10000/5)*30% =600

Incremental after-tax CF per year =21000+600 =21600

0 0
Add a comment
Know the answer?
Add Answer to:
Trimble Lawn mowing bought a new mower for $10,000. The new mower will increase the annual...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

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

  • Laurel's Lawn Care Ltd., has a new mower line that can generate revenues of $174,000 per...

    Laurel's Lawn Care Ltd., has a new mower line that can generate revenues of $174,000 per year. Direct production costs are $58,000, and the fixed costs of maintaining the lawn mower factory are $24,000 a year. The factory originally cost $1.45 million and is being depreciated for tax purposes over 25 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm's tax bracket is 25%. (Enter your answer in dollars not in millions.) Operating cash...

  • Is this answer correct? Laurel's Lawn Care Ltd., has a new mower line that can generate...

    Is this answer correct? Laurel's Lawn Care Ltd., has a new mower line that can generate revenues of $156,000 per year. Direct production costs are $52,000, and the fixed costs of maintaining the lawn mower factory are $21,000 a year. The factory originally cost $1.30 million and is being depreciated for tax purposes over 25 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm's tax bracket is 25%. (Enter your answer in dollars not...

  • URGENTT Laurel's Lawn Care Ltd., has a new mower line that can generate revenues of $126.000...

    URGENTT Laurel's Lawn Care Ltd., has a new mower line that can generate revenues of $126.000 per year. Direct production costs are $42.000. and the fixed costs of maintaining the lawn mower factory are $16.000 a year. The factory originally cost $1.05 million and is being depreciated for tax purposes over 25 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm's tax bracket is 25%. (Enter your answer In dollars not In mllllons.) Operating...

  • Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $171,000 per...

    Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $171,000 per year. Direct production costs are $57,000, and the fixed costs of maintaining the lawn mower factory are $23,500 a year. The factory originally cost $1.14 million and is being depreciated for tax purposes over 20 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 25%. (Enter your answer in dollars not in millions.)

  • Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $147,000 per year. Direct production costs a...

    Laurel’s Lawn Care Ltd., has a new mower line that can generate revenues of $147,000 per year. Direct production costs are $49,000, and the fixed costs of maintaining the lawn mower factory are $19,500 a year. The factory originally cost $0.98 million and is being depreciated for tax purposes over 20 years using straight-line depreciation. Calculate the operating cash flows of the project if the firm’s tax bracket is 25%. (Enter your answer in dollars not in millions.)

  • Equipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase...

    Equipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase by $20,000; annual cash operating expenses will increase by $7,000; straight-line depreciation is used; the asset has a ten-year life; the salvage value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return? (round to the nearest %)

  • . The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line...

    . The new equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of six years (years 1-6) The old machine is also being depreciated on a straight-line basis. It has a book value or 200,000 (at year 0) and four more years of depreciation left ($50,000 per year). . The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old...

  • Exercise 5 a. A new operating system for an existing machine is expected to cost $520,000...

    Exercise 5 a. A new operating system for an existing machine is expected to cost $520,000 and have a useful life of 6 years. The system yields an incremental after-tax income of $150,000 each year after deducting its straight-line depreciation. The predicted salvage value of the system is $10,000 b. A machine costs $380,000, has a $20,000 salvage value is expected to last 8 years, and will generate an after tax income of $60,000 per year after straight-line depreciation. Compute...

  • To open a new store, Linton Tire Company plans to invest $312,000 in equipment expected to have a...

    To open a new store, Linton Tire Company plans to invest $312,000 in equipment expected to have a six r useful life and no salvage value. Linton expects the new store to generate annual cash revenues of $319,000 and to incur annual cash operating expenses of $189,000. Linton's average income tax rate is 35 percent. The company uses straight-line depreciation. Required Determine the expected annual net cash inflow /outflow from operations for each of the first four years after Linton...

  • Graziano Corporation (GC) is considering a project to purchase new equipment. The equipment would be depreciated...

    Graziano Corporation (GC) is considering a project to purchase new equipment. The equipment would be depreciated by the straight-line method over its 3-year life and would have a zero-salvage value. The project requires an investment of $6,000 today on net working capital. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other company’s products and would reduce its pre-tax annual cash flows of $5,000 per year. The investment...

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