Dog Corporation recorded $175,000 in depreciation expenses in the current year. What will be the amount of its tax shield if its tax rate is 30%?
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- The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?Financial AccountingA corporation’s marginal tax rate is 28%. An outlay of $35,000 is being considered for a new asset. Estimated annual receipts are $20,000 and annual disbursements $10,000. The useful life of the asset is 5 years, and it has no salvage value. a. What is the prospective rate of return before income tax? b. What is the prospective rate of return after taxes, assuming straightline depreciation?
- A firm invests $10.70 million in a new stamping machine. It depreciates straight-line for tax purposes over 5 years. The tax rate is 21%, inflation is 2% a year, and the discount rate is 8%. What is the PV of the depreciation tax shield?You have a depreciation expense of $478,000 and a tax rate of 35%. What is your depreciation tax shield? The depreciation tax shield will be $ (Round to the nearest dollar.)Mojave Corporation was looking at an investment that would generate $5,000 in net income before taxes. The company's tax rate is 21%, and there would be $2,000 a year in depreciation on the assets. What is the after-tax cash flow of this investment? $4,370 $5,950 $3,050 $3,950 O None of the above
- -Suppose a 5-year piece of equipment purchased for 500,000 is sold at the end of year 4 after taking four years of straight- line depreciation. Assume that the equipment is sold for 200,000 and the tax rate is 35%. What is the book value? Is there tax savings on the sale? Is there tax effect?Consider a profitable company with an asset that cost $3 million that is depreciated straight line to zero over. It’s 11 year depreciable tax life. The asset is to be used in a three year project at the end of the project. The asset can be sold for 362,000. If the relevant tax rate is 18%, what is the after tax cash flow from the sale of this asset (after tax salvage)?The XYZ Company is considering a new project that will have an annual depreciation expense of $3.7 million. If XYZ's corporate tax rate is 13 %, then what is the value of the depreciation tax shield on their new project?
- K You have a depreciation expense of $546,000 and a tax rate of 22%. What is your depreciation tax shield? The depreciation tax shield will be $ (Round to the nearest dollar.)Patterson recently reported EBITA of $14.5 million. It had $2.0 million of interest expense, and its corporate tax rate was 40%. What was its charge for depreciation and amortization?Suppose you sell a fixed asset for $115,000 when it's book value is $135,000. If your company's marginal tax rate is 21%, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?