A real estate photographer would like to invest in a drone camera so that she can take better aerial footage of properties. The dronewill cost $1,400 and be used for the next 2 years before she needs to upgrade to a more recent model. She estimates that the dronewill generate additional photography revenue of $1,000 per year, and that her drone will have a salvage value of $300 at the end of the2nd year. Assuming a tax rate of 22%, a MACRS 5-vear property class, 100% bonus depreciation, and an after-tax MARR of 9%,compute the after-tax present worth of the drone and determine whether or not the photographer should invest in this drone.Click here to access the TVM Factor Table calculator.Click here to access the MACRS-GDS Property Classes.Click here to access the MACRS-GDS percentages page.Click here to access the MACRS-GDS percentages for 27.5-year residential rental property.Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is 15.Should the photographer invest in the drone?

A. The after-tax present worth of the drone = PV of after-tax Cash inflows + PV of Tax benefit of…

Answered: A real estate photographer would like…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Iqra University is considering investing in an online book ordering and information service, which will be managed by 2 employees. The following estimates relate to the costs of starting the service and the subsequent revenues from it. The initial investment needed to start the service, including the installation of additional phone lines and computer equipment, will be $1,000,000. These investments are expected to have a life of 4 years with 0 salvage value.The investments will be depreciated straight line over the four-year life.The revenues in the first year are expected to be $1500,000, growing 20% in year 2, and 10% in the two years following.The salaries and other benefits for the employees are estimated to be $150,000 in year 1, and grow 10% a year for the following three years.The cost of the books is assumed to be “0.60” of the revenues in each of the four years.The non-cash working capital, which includes the inventory of books needed for the service and the accounts…
A new homeowner, Ms. Dee Young, needs to decide whether to install R-11 or R-19 insulation in the attic of her new home. The insulated area is 1,550 square feet. The upgrade from R-11 to R-19 insulation costs $0.05 per square foot. The upgraded insulation is expected to save Ms. Dee Young approximately 440 kilowatt hours of energy usage per year. The planning horizon is 22 years and electricity costs $0.10/kWh. MARR is 11% per year. Based on a future worth analysis, is the upgrade to R-19 insulation economically justified? The future worth of R-19 insulation is $ ? Carry all interim calculations to 5 decimal places and then round your final answer to 2 decimal places. The tolerance is +0.15.
Chris is considering submitting a bit for the requested project, which involves building four houses per year for the next 3 years for a gated community. To complete such project, Chris would need to buy tools in the amount of $66,000, which would be completely depreciated over the project’s lifespan assuming straight-line depreciation, and such tools can be sold for $40,000 at the end of the project. Net working capital would be $16,000 over the life span of the project. The project’s variable cost would be $88,000 per house, and fixed cost would be $18,000 each year. The tax rate is 34% and Chris’ require rate of return is 14%. How much at minimum Chris should bid for each house? (Rounded to the nearest $500). A. $115,000 B. $98,500 C. $97,500 D. $96,500 E. $95,50
Cadux Candy Company's income statement for the year ended December 31, 2024, reported interest expense of $3 million and income tax expense of $20 million. Current assets listed in its balance sheet include cash, accounts receivable, and inventory. Property, plant, and equipment is the company's only noncurrent asset. Financial ratios for 2024 are listed below. Profitability and turnover ratios with balance sheet items in the denominator were calculated using year-end balances rather than averages. Debt to equity ratio Current ratio 0.8 2.0 Acid-test ratio 1.0 Times interest earned ratio 16 times Return on assets 20% Return on equity 36% Profit margin on sales 10% Gross profit margin (gross profit divided by net sales) 20% Inventory turnover 8 times Receivables turnover 21 times Required: Prepare a December 31, 2024, balance sheet for the Cadux Candy Company. Note: Enter your answers in millions. Round your intermediate calculations and final answer to the nearest whole million. CADUX…
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In order to improve the stability of his farm income, a farmer in Eastern Wyoming is considering working with a wind energy developer to build turbines on his land. Each turbine will increase the farmer's net revenue by $3,500 annually. He wants to host 30 turbines. The risk-free pre-tax discount rate is 8% and there is a risk premium of 4%. Inflation is 1.5% and the marginal tax rate is 20%. What is the present value of after-tax net returns over 6 years? $379,433 $408,115 $388,554 $355,488 None of the answers are correct
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You graduate and decide you will start a consulting business out of your home. To perform the basic analysis needed for your field, you need to purchase testing equipment. The seller has 2 prices, one for incorporated businesses ($25,000) and one for individuals ($20,000). The salvage value of this equipment after 4 years is predicted to be $10,000 in both cases. You and your partner are debating whether it is better to pay the higher purchase price and be able to depreciate the asset at a CCA rate of 30%, with the corporate tax rate of 40% OR to just keep them as a personal asset, with a sales tax rate of 10% at the time of sale. If we ignore the big picture arguments to be made here, what are the tax implications involved with each purchase/ sale option?
A group of developers is opening a health club near a new housing development. The health club-which will have exercise and workout equipment, basketball courts, swimming pools, an indoor walking/running track, and tennis courts-is one of the amenities the developers are building to attract new homebuyers. However, they want the health club to at least break even the first year or two. The annual fixed cost for the building, equipment, utilities, staff, and so on is $875,000, and annual variable costs are $200 per member for things like water, towels, laundry, soap, shampoo, and other member services. The membership fee is $225 per month. How many members will the club need to break even? If the club doubles its break-even membership after a year, what will its profit be?
ACDC Company is considering the installation of a new machine that costs $150,000. The machine is expected to lead to net income of $44,000 per year for the next 5 years. Using straight-line depreciation, $0 salvage value, and an effective income tax rate of 28%, determine the after-tax rate of return for this investment. If the company’s after-tax MARR rate is 12%, would this be a good investment or not?
Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of five years it is believed that the machine could be sold for $15,000. The machine would increase EBDT by $42,000 annually. Builtrite’s marginal tax rate is 34%. What is the TCF associated with the purchase of this machine? $5,100 $7,500 $0 $9,900
A newlywed couple is planning to build a house of their own. They are considering two options:a. The construction of a house now, to cost 500,000.b. The construction of a smaller house now, to cost 250,000 and at the end of 3 years, an extension to be added to cost 350,000.Which of the two options is more economical if the interest rate is 20% compounded annually and depreciation not to be considered?ANS. OPTION B IS MUCH ECONOMICAL BY 47,453.70

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