Problem 12-2 Spreadsheet Problem: PV of Depreciation Tax Benefits (LG12-4) Your company is considering a new project that will require $855,000 million of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $144,000 using straight-line depreciation. Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 12 percent, and the firm's tax rate is 21 percent. Estimate the present value of the tax benefits from depreciation. Note: Round your answer to 2 decimal places. Present value I
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- 7.2 Project Beta is a 6-year project which requires an initial outlay of $4,000. This outlay will be depreciated using straight-line depreciation over the life of the project. It will generate incremental revenue of $2000 per year and incremental costs (excluding depreciation) of $500. The tax rate is 30%. What is the annual depreciation amount? a. $867 b. $667 c. $1533 d. $1333 Clear my choiceuiz Instructions Question 26 Your company, RMU Inc., is considering a new project whose data are shown below. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the project's Year 1 cash flow? Sales revenues $26,750 Operating costs $12,000 Tax rate 25.0% O $2,350 $4,345 $16,820 O $1,063 $18,125 « Previous Next > 80 888 esc F1 F2 F3 F4 F5 F6 F7 F8 F9 F10 # $ % & 1 2 3 4 5 6 8 Q W E R Y ab A S D G J K Jock N M H ntrol option command comma I LL NProblem 12-8 After-Tax Cash Flow from Sale of Assets (LG12-4) Your firm needs a computerized machine tool lathe which costs $46,000 and requires $11,600 in maintenance for each year of its 3- year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35 percent and a discount rate of 13 percent. If the lathe can be sold for $4,600 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Salvage value after $ 1,430.65 tax
- Problem 3 A piping contractor is considering the purchase of a number of pipe laying machines for a project that will last for 6 years. Each machine will cost $ 50,000.00 and have no salvage value at the end of the project. In determining whether to make this purchase, straight line deprecation can be used and an annual income tax on profits of of 34%, and an after-tax MARR is 8%. What is the minimum annual net benefit before taxes that must be generated by the each machine in order to justify its purchase? Answer:es Problem 12-27 (Algo) MACRS depreciation and net present value [LO12-4] Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $220,000, and it will produce earnings before depreciation and taxes of $72,000 per year for three years, and then $35,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 14 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Net present value b. Based on the…7 Your company is considering a new project that will require $978.000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $148.000 using straight line depreciation Neither bonus depreciation nor Section 179 expensing will be used The cost of capital is 13 percent, and the firm's tax rate is 21 percent Estimate the present value of the tax benefits from depreciation (Round your answer to 2 decimal places)
- Question 9 Daily Enterprises is purchasing a $9.6 million machine. It will cost $52,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.1 million per year along with incremental costs of $1.1 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine? The free cash flow for year 0 will be $nothing. (Round to the nearest dollar.) The free cash flow for years 1–5 will be $_______________________ (Round to the nearest dollar.)Project Section 1: You are considering buying an industrial equipment whose price is 445000. The equipment is expected to earn an annual revenue of $150,000. The equipment will be depreciated under MACRS as a five-year recovery property. The equipment will be used for seven years, at the end of which time, you can sell it for $50,000. Your company's marginal tax rate is 35% over the project period. Perform the following: a) Determine the net after-tax cash flows for each period over the project life. b) Net present worth assuming company MARR 15% . c) Annual equivalent cash flow company MARR 15%. = =6.10 Calculating Salvage Value An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $7.6 million and will be sold for $1.4 million at the end of the project. If the tax rate is 21 percent, what is the after tax salvage value of the asset?
- Question list Question 1 Question 2 Question 3 Question 4 O Question 5 O Question 6 Question 7 Question 8 (Calculating changes in net operating working capital) Duncan Motors is introducing a new product and has an expected change in net operating income of $290,000. Duncan Motors has a 36 percent marginal tax rate. This project will also produce $51,000 of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project $34,000 27.000 53,000 With the Project $20,000 36.000 91,000 Accounts receivable Inventory Accounts payable (Click on the loon in order to copy ds contents into a spreadsheer) What is the project's free cash flow in year 17 The free cash flow of the project in year 1 is $. (Round to the nearest dolar) Help me solve this View an example Get more help. COLD Clear all Check answer6. Problem 12.11 (Replacement Analysis) eBook St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $54,000 per year. The new machine will cost $85,000, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is eligible for 100% bonus depreciation at the time of purchase. The applicable corporate tax rate is 25%, and the firm's WACC is 12%. The old machine has been fully depreciated and has no salvage value. What is the NPV of the project? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent. $ Should the old riveting machine be replaced by the new one? -Select- ↑