Lawn.com is expected to have operating losses of $325,100 in its first year of business and $278,100 in its second year. However, the company expects to have income before taxes of $372,000 in its third year and $700,800 in its fourth year. The company's required rate of return is 10 percent. Assume a tax rate of 35 percent and that current losses can be used to offset taxable income in future years. Click here to view factor tables What is the present value of tax savings related to the operating losses in years 1 and 2? (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to O decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Present value $ 183879 Ε
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- Suppose a firm's tax rate is 25%. 1. What effect would a $10.92 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to a reduction in taxes of 25%×$10.92 million=$2.73 million. B. A $10.92 million operating expense would be immediately expensed, increasing operating expenses by $10.92 million. This would lead to an increase in taxes of 25%×$10.92 million=$2.73 million C. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. There would be no effect on next year's earnings. D. Earnings would decline by $10.92 million−$2.73 million=$8.19 million. The same effect would be seen on next year's earnings 2. What effect would a $10.25 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.05…Global Corp. expects sales to grow by 7% next year. Using the percent of sales method and the data provided in the given tables LOADING... , forecast: a. Costs except depreciation b. Depreciation c. Net income d. Cash e. Accounts receivable f. Inventory g. Property, plant, and equipment h. Accounts payable (Note: Interest expense will not change with a change in sales. Tax rate is 26%.) The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career. Income Statement Net Sales 185.3Costs Except Depreciation -175.4EBITDA 9.9Depreciation and Amortization -1.2EBIT 8.7Interest Income (expense) -7.7Pretax Income 1Taxes (26%) -0.3Net Income 0.7 Balance Sheet Assets Cash 23.4Accounts…Suppose a firm's tax rate is 25%. a. What effect would a $9.05 million operating expense have on this year's earnings? What effect would it have on next year's earnings? b. What effect would a $10.2 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.04 million per year for five years? What effect would it have on next year's earnings? a. What effect would a $9.05 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices that apply.) A. A $9.05 million operating expense would be immediately expensed, increasing operating expenses by $9.05 million. This would lead to a reduction in taxes of 25% x $9.05 million = $2.26 million. B. A $9.05 million operating expense would be immediately expensed, increasing operating expenses by $9.05 million. This would lead to an increase in taxes of 25% × $9.05 million = $2.26 million. C. Earnings would decline by $9.05…
- Suppose a firm’s tax rate is 25%. 1. What effect would a $9.26 million operating expense have on this year's earnings? What effect would it have on next year's earnings? (Select all the choices thatapply.) A. A $9.26 million operating expense would be immediately expensed, increasing operating expenses by $9.26 million. This would lead to a reduction in taxes of 25%×$9.26 million=$2.32 million. B. A $9.26 million operating expense would be immediately expensed, increasing operating expenses by $9.26 million. This would lead to an increase in taxes of 25%×$9.26 million =$2.32 million. C. Earnings would decline by $9.26 million−$2.32 million=$6.94 million. The same effect would be seen on next year's earnings. D. Earnings would decline by $9.26 million−$2.32 million=$6.94 million. There would be no effect on next year's earnings. 2. What effect would a $11.75 million capital expense have on this year's earnings if the capital expenditure is depreciated at a rate of $2.35 million…Suppose a firm's tax rate is 25%. a. What effect would a$9.85 million operating expense have on this year's earnings? What effect would it have on next year's earnings? b. What effect would an $8.95million capital expense have on this year's earnings if the capital is depreciated at a rate of $1.79 million per year for five years? What effect would it have on next year's earnings?A market research firm with current sales of $750 does not expect any growth in sales for the next two years. The company, however, anticipates that expenses, currently at $160, will increase to $240 next year and to $270 the year after. Assuming a tax rate of 34%, determine the firm’s cash flow in year two. Assume straight line depreciation of $50 each year. Select one: a. ($333.80) b. $389.40 c. ($389.40) d. $333.80 e. $366.00 Clear my choice
- The Berndt Corporation expects to have sales of $12 million. Costs other thandepreciation are expected to be 75% of sales, and depreciation is expected tobe $1.5 million. All sales revenues will be collected in cash, and costs otherthan depreciation must be paid for during the year. Berndt’s federal-plusstate tax rate is 40%. Berndt has no debt.a. Set up an income statement. What is Berndt’s expected net income? Itsexpected net cash flow?A market research firm with current sales of $750 does not expect any growth in sales for the next two years. The company, however, anticipates that expenses, currently at $160, will increase to $240 next year and to $270 the year after. Assuming a tax rate of 34%, determine the firm’s cash flow in year two. Assume straight line depreciation of $50 each year. Select one: a. ($333.80) b. $389.40 c. ($389.40) d. $333.80 e. $366.00Hernandez Corporation expects to have the following data during the coming year. What is Hernandez's expected ROE? (Show your work) Assets = $200,000 D/A = 65% EBIT = $25,000 Interest rate = 8% Tax rate = 40%
- In Geri Co, the 5 year weighted average historical pre-tax economic earnings are $1,250,000. The tax rate is 28%. The hurdle and debt rate are 12.25%. The adjusted net assets from prior year-end is $2,050,000. The cap rate applicable to this kind of company is 25% pretax. Determine the value of this business using reasonable rate return on assets. a. $3,995,500 b. $2,050,000 c. $6,045,500 d. Cannot be determined from the information provided.Lawn.com is expected to have operating losses of $329,300 in its first year of business and $293,400 in its second year. However, the company expects to have income before taxes of $374,400 in its third year and $589,300 in its fourth year. The company's required rate of return is 10 percent. Assume a tax rate of 35 percent and that current losses can be used to offset taxable income in future years. Click here to view factor tables What is the present value of tax savings related to the operating losses in years 1 and 2? (Round present value factor calculations to 4 decimal places, e.g. 1.2151 and final answer to O decimal places, e.g. 125. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Present value $ +A 189641Jim's Espresso expects sales to grow by 10.4% next year. Assume that Jim's pays out 85.9% of its net income. Use the following statements LOADING... and the percent of sales method to forecast: a. Stockholders' equity b. Accounts payable The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career. Income Statement Sales $205,430Costs Except Depreciation (99,920)EBITDA $105,510Depreciation (6,070)EBIT $99,440Interest Expense (net) (570)Pretax Income $98,870Income Tax (34,605)Net Income $64,265 Balance Sheet Assets Cash and Equivalents $14,920Accounts Receivable 2,010Inventories 3,950Total Current Assets $20,880Property, Plant and Equipment 10,070Total Assets $30,950 Liabilities…