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You are called by Hope van Dyne to determine whether a new Pym technology for miniaturized food delivery is economically desirable. This project will require $50,000,000 in equipment to infuse food with modified Pym particles. This equipment is categorized as ten-years MACRS property. The project will bring revenue of $24,000,000 starting in the first year. After that, the revenue will grow 4% every year as more people take a liking to miniature food. The main cost of tis project is the salary of technicians, which in the first year will be $10,000,000. The salary of these workers will increase with the general inflation rate of 2% every year. The project is expected to last five years, at the end of which all the equipment can be sold for $10,000,000. . Assuming a tax rate of 21%, compute income and cash flows over the project life (80 pts) . If Pynn Technologies other ongoing investments return 12% yearly, is this project acceptable? Justify your answer (20 pts)
Homework Answers
| Years | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Purchase of equipments | (50,000,000.00) | ||||||||||
| Revenue | 24,000,000.00 | 24,960,000.00 | 25,958,400.00 | 26,996,736.00 | 28,076,605.44 | 29,199,669.66 | 30,367,656.44 | 31,582,362.70 | 32,845,657.21 | 34,159,483.50 | |
| Salary | (10,000,000.00) | (10,200,000.00) | (10,404,000.00) | (10,612,080.00) | (10,824,321.60) | (11,040,808.03) | (11,261,624.19) | (11,486,856.68) | (11,716,593.81) | (11,950,925.69) | |
| Sale of equipment | 10,000,000.00 | ||||||||||
| Cashflow before dep | (50,000,000.00) | 14,000,000.00 | 14,760,002.00 | 15,554,403.00 | 16,384,660.00 | 17,252,288.84 | 18,158,867.63 | 19,106,039.25 | 20,095,514.03 | 21,129,072.40 | 32,208,567.81 |
| Depricaiton | 5,000,000.00 | 9,000,000.00 | 7,200,000.00 | 5,760,000.00 | 4,610,000.00 | 3,685,000.00 | 3,275,000.00 | 3,275,000.00 | 3,280,000.00 | 3,275,000.00 | |
| Net Revenue | 9,000,000.00 | 5,760,002.00 | 8,354,403.00 | 10,624,660.00 | 12,642,288.84 | 14,473,867.63 | 15,831,039.25 | 16,820,514.03 | 17,849,072.40 | 28,933,567.81 | |
| Tax @21% | (1,890,000.00) | (1,209,600.42) | (1,754,424.63) | (2,231,178.60) | (2,654,880.66) | (3,039,512.20) | (3,324,518.24) | (3,532,307.95) | (3,748,305.20) | (5,731,647.14) | |
| Profit after tax | 7,110,000.00 | 4,550,401.58 | 6,599,978.37 | 8,393,481.40 | 9,987,408.18 | 11,434,355.42 | 12,506,521.01 | 13,288,206.08 | 14,100,767.20 | 23,201,920.67 | |
| Return | 14.22% | 9.10% | 13.20% | 16.79% | 19.97% | 22.87% | 25.01% | 26.58% | 28.20% | 46.40% |
| Tax for 10th year | |
| Revenue | 34,159,483.50 |
| salary | (11,950,925.69) |
| profit on sale of eqipments | 8,360,000.00 |
| dep | (3,275,000.00) |
| Total | 27,293,557.81 |
| Tax @21 % | 5,731,647.14 |
The project is acceptable as it will give excess return than normal projects.
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I am.handicap student please help fast nt seles Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year5-year 7-year 10-yea...
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Please refer to IRS Publication 946 2. In plain English, explain how depreciation was calculated for...
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years 1-3.
3. In plain English, explain how depreciation was calculating
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year 3; divide by 5, but you must explain why you divided by
5).
4. Additional comments (optional):
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Question 3 (10 points):
Using the Modified Accelerated Cost Recovery method (table A-1),
calculate the depreciation of $2,500,000 property for 7-year half
-year convention. Note: you just need to calculate the
depreciation; you do not need to use it in any further
calculations.
Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 33.33% 44.45 14.81 20.00% 32.00 19.20 11.52 11.52 14.29% 24.49 17.49 12.49 8.93...
THIS IS BASED ON 5 YEAR DEPRECIATION.
2. In plain English, explain how depreciation was calculated for
years 1-3.
3)In plain English, explain how depreciation was calculating for
years 4-6
Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 20-year 33.33% 44.45 14.81 7.41 20.00% 32.00 19.20 14.29% 24.49 17.49 12.49 8.93 10.00% 18.00 14.40 11.52 9.22 5.00% 9.50 8.55 7.70 6.93 3.750% 7.219 6.677 6.177...
In plain English, explain how depreciation was calculated for
years 1-3, for the 5-year column
3. In plain English, explain how depreciation was calculating
for years 4-6 (Hint: See MACRS4 solution, end-of-year basis for
year 3; divide by 5, but you must explain why you divided by
5).
Depreciation rate for recovery period Year 3-year 10-year 20-year 5-year 7-year 15-year 20.00% 14.29% 10.00% 5.00% 3.750% 33.33% 24.49 18.00 9.50 7.219 44.45 32.00 14.81 19.20 17.49 14.40 8.55 6.677 3 4...
Please refer to IRS Publication 946
2. In plain English, explain how depreciation was calculated for
years 1-3.
3. In plain English, explain how depreciation was calculating
for years 4-6 (Hint: See MACRS4 solution, end-of-year basis for
year 3; divide by 5, but you must explain why you divided by
5).
4. Additional comments (optional):
Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period 3-year 5-year 7-year 10-year 15-year Year 20-year 33.33%...
Clay LLC placed in service machinery and equipment (seven-year property) with a basis of $3,462,500 on June 6, 2019. Assume that Clay has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including $179 expensing (ignoring any possible bonus depreciation). (Use MACRS Table 1) (Round final answer to the nearest whole number.) Multiple Choice $494,791 $1,011073 $459,430. None of the choices are correct $686.930 Table 1 MACRS Half-Year Convention 20-Year Year 1 3.750% Year 2 7.219 Depreciation Rate...
Arlington LLC purchased an automobile for $80,000 on July 5, 2018. What is Arlington's depreciation expense for 2018 if its business use percentage is 80 percent (ignore any possible bonus depreciation)? (Use MACRS Table 1, and Exhibit 10-10.) Multiple Choice None of the choices are correct. $12,000. $6,125. $8,000. $8,000. TABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period Year 3-Year 5-Year 10-Year 15-Year 20-Year 20.00% 32.00 19.20 11.52 11.52 5.76 7-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93...
83 Reid acquired two assets in 2019: on August 6th he acquired computer equipment (five-year property) with a basis of $1,020,000 and on November 9th he acquired machinery (seven-year property) with a basis of $1,020,000. Assume that Reld has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction, including 5179 expensing (but not bonus depreciation). (Use MACRS Tab .) points Essay Toolbar navigation ( 01:07:02 BI V SE 11. A A 7.70 Table 1 MACRS Half-Year Convention Depreciation...
Arlington LLC purchased an automobile for $62,000 on July 5, 2018. What is Arlington's depreciation expense for 2018 if ts business use percentage is 61 percent (ignore any possible bonus depreciation)? (Use MACRS Table 1, and Exhibit 10-10) Multiple Choice $6,200 $6,100. $4,775 $9,300 None of the choices are correct. TABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period 7-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 Year 3-Year 5-Year 10-Year 1 5-Year 20-Year 33.33% 44.45 14.81 7.41...
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