A project will incur $500 in shutdown costs the year after the completion of the project. The tax rate is 25%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)? Question 4Answer a. $-125 b. $-105 c. $105 d. $125

A project will incur $500 in shutdown costs the year after the completion of the project. The tax rate is 25%. What is the tax shield resulting from these tax-deductible shutdown costs (where a negative number means a cash outflow and a positive number means an incremental cash inflow)? Question 4Answer a. $-125 b. $-105 c. $105 d. $125

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter13: Capital Budgeting: Estimating Cash Flows And Analyzing Risk

Section: Chapter Questions

Problem 2P

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7.3 q4- A project will incur $600 in shutdown costs the year after the completion of the project. The tax rate is 30%. What is the value of the after-tax shutdown costs (where a negative number is a net cash outflow and a positive number is an incremental cash inflow)? a. $420 b. $380 c. $-420 d. $-380
What is the IRR for the following project if its initial after-tax cost is R5 000 000 and it is expected to provide after-tax operating cash inflows of R1 800 000 in year 1, R1 900 000 in year 2, R1 700 000 in year 3 and R1 300 000 in year 4? What is the correct answer? A. 15.57% B. 0.00% C. 13.57% D. None of the above
A project will reduce costs by $42,700 but increase depreciation by $21,100. What is the operating cash flow if the tax rate is 25 percent? Multiple Choice $47,850 $37,300 $32,025 $15,950 $26,500
What is the net after tax cash flow for year 4 if the applicable tax rate is 40%? a. $39,328b. $68,321c. $20,327d. $47,331 What is the net present worth of the project's after-tax cash flows at 12%? a. $0b. $36,410c. $24,966d. $112,339 If the company were able to sell the asset for $60,000 in year 5 instead of $50,000, what would be the new after-tax cash flow for year 5?a. $88,553b. $31,663c. $92,553d. The answer cannot be determined from the information given.
In your first job with TBL Inc. your task is to consider a new project whose data are shown below. What is the project's Year 1 cash flow? The annual operating cash flows of the project can be calculated as follows: OCF = {[Sales - Operating Costs]*(1-Tax Rate)} + (Depreciation * Tax Rate) Sales revenues $225,250 Depreciation $78,847 Other operating costs $92,000 Tax rate 18%
QUESTION 1 A new machine is to be purchased for $200,000. The company believes it will generate $75,000 annually in revenue due to the purchase of this machine. The company will have to train an operator to run this machine and this will result in additional labor expenses of $25,000 annually. The new machine will be depreciated using 5 years MACRS, even though the life of the project is 7 years, and the salvage value is estimated to be $0 at the end of year 7. The tax rate is 40% and the company's MARR is 15%.
You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 21 percent. What is the worst-case operating cash flow? Unit sales Sales price per unit Variable cost per unit Fixed costs -$2,545 $11,145 $88,855 $27,556 O $63,937 Base-Case Lower Bound Upper Bound 9,800 12,800 $34 $24 $ 9,200 11,300 $ 39 $25 $ 9,700 $44 $26 $ 10,200
Part B: Solve the following excersises: 1. A company is considering two mutually exclusive projects X and Y. Each require an initial investment of OMR 100,000.The after tax cash inflows associated with each project are as follows: Year Project X Cash flows Project Y Cash flows (Initial Investment) 120,000 120,000 25,000 20,000 2 ? ? 3 ? ? ? ? 5 ? ? (a) Complete the table where Payback period for Project X is 3.5 and for project Y is 4. (b) Which project is better?
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