Given the information of a project, answer questions 17 through 22: Cost of equipment=$500,000 Shipping and...
Given the information of a project, answer questions 17 through 22:
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Cost of equipment=$500,000
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Shipping and installation = $15,000
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$20,000 in net working capital required at setup
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5-year project life,10-year class life
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Simplified straight line depreciation
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Revenues will increase by $200,000 per year
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Operating costs will rise by $15,000 per year
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Salvage value after year 5 is $300,000
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Discount rate = 13%,marginal tax rate = 34%
Question 18 The annual cash flow is...
Incremental revenue 200,000
- Incremental costs 15,000
- Depreciation expense 51,500
Equals: 133,500
Incremental EBT 133,500
- Additional taxes 45,390
Equals: 88,110
Incremental Net Income 88,110
+ Depreciation reversal 51,500
Equals: 139,610
Annual Cash Flow 139,610
Depreciation Expense = Book Value of the asset ÷ asset life = 515,000 ÷ 10 = 51,500
How did do you get Addition Taxes to be 45,390???????? Please write legibly. Thank you for helping a struggling student.
Homework Answers
Additional taxes = EBT * Tax rate
Incremental EBT = 133500
Tax rate = 34%
Hence additional taxes = 133500*34%
= $45390
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Given the information of a project, answer questions 17 through
22:
Cost of equipment=$500,000
Shipping and...
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