Homework Answers
Solving this problem using NPW with MIRR of 10% after taxes.
Since alt 2 has a higher NPW value and more life time than alt 1, the corporation should go with alt 2 because it long term with higher usable value and for a corporation with 7 million taxable annual income should definitely have a longer time period. The present worth of all the cash flows (inflows are positive and outflows are negative). So alt 2 should be chosen by the corporation.
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12-68 A corporation with $7 million in annual taxable income, paying 34% income tax, is consideri...
6. A Texas corporation is considering the following two alternatives: Before Tax Cash Flow (thousands) Year Alternative...
6. A Texas corporation is considering the following two alternatives: Before Tax Cash Flow (thousands) Year Alternative 1 Alternative 2 10,000 20,000 0 1- 10 4,500 4,500 11-20 0 4,500 Both alternatives will be depreciated with 7 year MACRS depreciation. As Texas has no state income tax requirement, the combined income tax rate for the company is 21%. Neither alternative is replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of...
selected? urm is considering three mutually exclusive alter- atives as part of a production improvement program....
selected? urm is considering three mutually exclusive alter- atives as part of a production improvement program. The alternatives are as follows: First cost $15,000 Maintenance 1,600 and operating Annual benefit 8,000 Salvage value 3,000 Useful life, in years4 Installed cost Uniform annual benefit Useful life, in years A B C $10,000 $15,000 $20,000 1.625 1.625 1,890 10 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A...
A widget manufacturer has the options of purchasing thingamajigs at $0.25 each for its new line...
A widget manufacturer has the options of purchasing thingamajigs at $0.25 each for its new line of doohickeys or install a $1,200,000 press to make the thingamajigs in their plant. It has been calculated that the material and overhead costs would be $0.12 per thingamajig made. (a) If 800,000 thingamajigs per year are needed and the press is installed, what is the payback period? (b) The press would be depreciated by straight-line depreciation using a 15-year useful life and no...
6) (28 points) A company is considering a replacement for an aging machine that has been...
6) (28 points) A company is considering a replacement for an aging machine that has been fully depreciated for tax purposes. The new machine will have an initial cost of $400,000 and is expected to generate an income of $125,000 per year. Its estimated salvage value at the end of its useful life of 4 years will be $60,000. The new machine is a MACRS-GDS 3-year property for calculating depreciation deductions. The effective tax rate is 35%. a) (20 points)...
12-68 Petty Corporation has been depreciating equipment over a 10-year life on which costs $24,000, was...
12-68
Petty Corporation has been depreciating equipment over a 10-year life on which costs $24,000, was purchased on January 1, 2016. The equi $6,000. On the basis of experience since acquisition, management has decided to a total life of 14 years instead of 10, with no change in the estimated residual al tive on January 1, 2020. The annual financial statements are prepared on a c presented). 2019 income and 2020 income before depreciation for 2019 and 2020 wer respectively....
A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing...
A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. At EOY 10, alternative III would be replaced with another alternative Ill having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should be chosen? Use the incremental IRR procedure. $40,000 $6,500 $20,000 $5,200 Installed cost Net annual revenue Salvage value Useful life Calculated IRR $30,000 $5,600 0 20 years 18.0% 20 years...
CFAT is Cash Flow After Tax SL- Straight line T.I- Taxable Income Problem 2-20 points Company...
CFAT is Cash Flow After Tax
SL- Straight line
T.I- Taxable Income
Problem 2-20 points Company B wants to compare the investment in three different countries based on the following information. Tax rate is 30% for all three countries. MARR is 9% compounded quarterly. Depreciation method Depreciation recapture Purchase Cost Gross Income Expense Salvage Life in years Actual selling price Country 1 SL with n=5 Not taxed 100,000 26,000 1,000 0 5 20,000 in year 5 Country 2 MACRS with...
I need this solved step by by step please by hand. Please no Excel. Thank You!...
I
need this solved step by by step please by hand. Please no Excel.
Thank You!
6) (28 points) A company is considering a replacement for an aging machine that has been fully depreciated for tax purposes. The new machine will have an initial cost of $400,000 and is expected to generate an income of $125,000 per year. Its estimated salvage value at the end of its useful life of 4 years will be $60,000. The new machine is a...
kindly help with question 12-24 step by step by hand. thanks 444 CHAPTER 12: INCOME TAXES...
kindly help with question 12-24 step by step by hand.
thanks
444 CHAPTER 12: INCOME TAXES FOR CORPORATIONS Contribute net present worth of this investment.com Mukasa Ssemakula, Wayne State Univ 12-25 A firm has invested $400,000 in ment. They will depreciate the eau bonus depreciation with the balan MACRS, assuming a $50,000 salvac end of the 5-year useful life. The fir to have a before-tax cash flow, afte expenses of operation (except depreci $165,000 per year. The firm's combined tax...
EESEEEEEEEEEEEEEEEEE 1) TRUE/False a) The income tax rates are the same for capital gains and depreciation...
EESEEEEEEEEEEEEEEEEE 1) TRUE/False a) The income tax rates are the same for capital gains and depreciation recapture of an asset T/F b) Depletion can be calculated in two different approach: Depletion allowance or percentage depletion / c) In Straight Line depreciation, the book value is zero at the end of its life. T/F d) Depreciation is method of capital expensed over period of time T/F ce) Income tax rates are same for capital gains and depreciation recapture of an asset....
6. A Texas corporation is considering the following two alternatives: Before Tax Cash Flow (thousands) Year Alternative 1 Alternative 2 10,000 20,000 0 1- 10 4,500 4,500 11-20 0 4,500 Both alternatives will be depreciated with 7 year MACRS depreciation. As Texas has no state income tax requirement, the combined income tax rate for the company is 21%. Neither alternative is replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of...
selected? urm is considering three mutually exclusive alter- atives as part of a production improvement program. The alternatives are as follows: First cost $15,000 Maintenance 1,600 and operating Annual benefit 8,000 Salvage value 3,000 Useful life, in years4 Installed cost Uniform annual benefit Useful life, in years A B C $10,000 $15,000 $20,000 1.625 1.625 1,890 10 20 For each alternative, the salvage value at the end of useful life is zero. At the end of 10 years, Alt. A...
6) (28 points) A company is considering a replacement for an aging machine that has been fully depreciated for tax purposes. The new machine will have an initial cost of $400,000 and is expected to generate an income of $125,000 per year. Its estimated salvage value at the end of its useful life of 4 years will be $60,000. The new machine is a MACRS-GDS 3-year property for calculating depreciation deductions. The effective tax rate is 35%. a) (20 points)...
12-68
Petty Corporation has been depreciating equipment over a 10-year life on which costs $24,000, was purchased on January 1, 2016. The equi $6,000. On the basis of experience since acquisition, management has decided to a total life of 14 years instead of 10, with no change in the estimated residual al tive on January 1, 2020. The annual financial statements are prepared on a c presented). 2019 income and 2020 income before depreciation for 2019 and 2020 wer respectively....
A firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. At EOY 10, alternative III would be replaced with another alternative Ill having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should be chosen? Use the incremental IRR procedure. $40,000 $6,500 $20,000 $5,200 Installed cost Net annual revenue Salvage value Useful life Calculated IRR $30,000 $5,600 0 20 years 18.0% 20 years...
CFAT is Cash Flow After Tax
SL- Straight line
T.I- Taxable Income
Problem 2-20 points Company B wants to compare the investment in three different countries based on the following information. Tax rate is 30% for all three countries. MARR is 9% compounded quarterly. Depreciation method Depreciation recapture Purchase Cost Gross Income Expense Salvage Life in years Actual selling price Country 1 SL with n=5 Not taxed 100,000 26,000 1,000 0 5 20,000 in year 5 Country 2 MACRS with...
I
need this solved step by by step please by hand. Please no Excel.
Thank You!
6) (28 points) A company is considering a replacement for an aging machine that has been fully depreciated for tax purposes. The new machine will have an initial cost of $400,000 and is expected to generate an income of $125,000 per year. Its estimated salvage value at the end of its useful life of 4 years will be $60,000. The new machine is a...
kindly help with question 12-24 step by step by hand.
thanks
444 CHAPTER 12: INCOME TAXES FOR CORPORATIONS Contribute net present worth of this investment.com Mukasa Ssemakula, Wayne State Univ 12-25 A firm has invested $400,000 in ment. They will depreciate the eau bonus depreciation with the balan MACRS, assuming a $50,000 salvac end of the 5-year useful life. The fir to have a before-tax cash flow, afte expenses of operation (except depreci $165,000 per year. The firm's combined tax...
EESEEEEEEEEEEEEEEEEE 1) TRUE/False a) The income tax rates are the same for capital gains and depreciation recapture of an asset T/F b) Depletion can be calculated in two different approach: Depletion allowance or percentage depletion / c) In Straight Line depreciation, the book value is zero at the end of its life. T/F d) Depreciation is method of capital expensed over period of time T/F ce) Income tax rates are same for capital gains and depreciation recapture of an asset....
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