the fourth and final year of a project, Glenny expects operating cash flow after taxes of P440,000. The project required an P60,000 investment in working capital at the beginning. Of that amount, P40,000 will be recovered in year 4 and P20,000 will be i
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In the fourth and final year of a project, Glenny expects operating cash flow after taxes of P440,000. The project required an P60,000 investment in working capital at the beginning. Of that amount, P40,000 will be recovered in year 4 and P20,000 will be in year 5. Machinery associated with the project will be sold for exactly its undepreciated value of P15,000. Tax rate is 40%. Total
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- A proposed cost-saving device has an installed cost of $570,000. It is in Class 8 (CCA rate = 20%) for CCA purposes. It will actually function for five years, at which time it will have no value. There are no working capital consequences from the investment, and the tax rate is 35%. a. What must the pre-tax cost savings be for us to favour the investment? We require an 11% return. (Hint: This one is a variation on the problem of setting a bid price.) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Cost savings $122332.17 b. Suppose the device will be worth $81,000 in salvage (before taxes). How does this change your answer? (Do not round your Intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Cost savings 170855.86The Shell Corporation has a 34% tax rate and owns a piece of petroleum-drilling equipment that costs $119,000 and will be depreciated at a CCA rate of 30%. Shell will lease the equipment to others and each year receive $33,100 in rent. At the end of five years, the firm will sell the equipment for $31,600. All values are presented in today's dollars. Calculate the overall present worth of these cash flows with tax effects if market interest rate is 10% and annual inflation rate is 2%. (Note: Don't use the $ sign in your answer and round it up to 2 decimal places)A firm can purchase a centrifugal separator (5-year MACRS property) for $22,000. The estimated salvage value is $4,000 after a useful life of six years. Operating and maintenance (O&M) costs for the first year are expected to be $2,200. These O&M costs are projected to increase by $1,000 per year each year thereafter. The income tax rate is 24% and the MARR is 11% after taxes. What must the uniform annual benefits be for the purchase of the centrifugal separator to be economical on an after-tax basis?
- Today ABC Corp. starts a project that requires it to invest in new equipment of $990,000. Doing so will earn ABC pre-tax cash flows of $142,000 annually over 9 years. The equipment has a salvage value of $187,000. ABC's cost of capital is 6.30%, and its tax rate is 30%. The equipment falls into the 30% CCA class (half year rule applies). What is the NPV of the project? PLEASE USE FINANCIAL CALCULATOR OR FORMULA NO EXCEL OR SPREADSHEETS THE ANSWER IS NOT CHOICE B a. $23,434 b. $211,428 c. -$3,319 d. -$214,747 e. -$111,224A company is evaluating the addition of equipment to its present operations. They need to purchase equipment for $160,000. The five year MACRS GDS Recovery Method is appropriate for the investment and the total tax rate (federal plus state) is 40%. Gross revenue is expected to be $30,000/year while maintenance costs are expected to be $5,000/year. It is expected that the operation will be shut down at the end of the fourth year with a salvage value of $20,000. a- Draw a BTCFD b- Prepare a table showing your development of the ATCF's. c- If the company's aftertax MARRis 12%/year, is this a profitable investment?llana Industries, Inc., needs a new lathe. It can buy a new high-speed lathe for $1.03 million. The lathe will cost $39,000 to run, will save the firm $118,900 in labour costs, and will be useful for 10 years. Suppose that for tax purposes, the lathe will be in an asset class with a CCA rate of 25% lana has many other assets in this asset class. The lathe is expected to have a 10-year life with a salvage value of $98,000. The actual market value of the lathe at that time will also be $98,000. The discount rate is 15% and the corporate tax rate is 35% What is the NPV of buying the new lathe? (Round your answer to the nearest cent.) NPV S
- The Advanced Silicon Devices semiconductor factory costs $20 million to build and is depreciated (on a straight line basis, to make this simple) over 20 years. Also it borrows the money to build the factory at 8% interest. The factory has a capacity of 400,000 chips per year that sell for $30 apiece. Labor costs are $1.5 million, and raw material costs are $0.5 million. Ongoing research and development costs are $3 million. The factory sells all its chips to the Itty Bitty Machine company, which manufactures 40,000 computers a year that sell (wholesale) for $800 each. That factory costs $35 million to build, with the same rate of interest and depreciation as the semiconductor factory. Besides paying for the chips, the costs are $4 million for labor, $2 million for other parts (half of which are imported), and $2.5 million for ongoing R&D. The computer company sells its entire stock to Computers R Us, which then sells them to individuals at an average retail price of $1,200 plus 5%…A machine costs $600,000 and is expected to yield an after-tax net income of $23,000 each year. Management predicts this machine has a 9-year service life and a $120,000 salvage value, and it uses straight-line depreciation. Compute this machine's accounting rate of return. Accounting Rate of Return Choose Numerator: Choose Denominator: Accounting Rate of Return %3D Accounting rate of returnWhat is the net effect on a project's NPV, if it's salvage value in 10 years increases from $24126 to $48252? Assume the discount rate is 8%, the CCA rate is 14.1%, the tax rate is 25%, and the half-year rule applies. a) $6734 b) $12520 c) $9393 d) $11262 e) $16860
- Question 2: A new bottle-capping machine costs $45 000, including $5 000 for installation. Operating and maintenance costs are expected to be $3 000 for the first year, increasing by $ 1 000 each year thereafter. The salvage value is calculated by straight-line depreciation where a value of 0 is assumed at the end of the service life. a) Construct a spreadsheet that computes the equivalent annual cost (EAC) for the bottle capper. What is the economic life if the expected service life is 6, 7, 8, 9 or 10 years? Interest is 12%./ b) How sensitive is the economic life to the different length of service life? Construct a sensitivity graph to illustrate this point.On May 1,2018, Karina purchased 100 shares of Gold stock at a total cost of $2,000, She received a total of $150 in dividends and sold the stock for $2,280 on May 15, 2019. Karina has a combined state and federal marginal tax rate of 28%. Her tax rate on both long-term capital gains and dividend income is 15%. What is her after-tax holding period return on her investment in Gold stock? 21.50% 23.48% 18.28% 16.28%Certain new machinery used in manufacturing of motor vehicles, when placed in service, is estimated to cost $275,000. It is expected to reduce net annual operating expenses by $56,000 per year for 10 years and to have a $41,000 MV at the end of the 10th year. Assume that the firm is in the federal taxable income bracket of $335,000 to $10,000,000 and that the state income tax rate is 7.5%. State income taxes are deductible from federal taxable income. This machinery is to be depreciated using the MACRS (GDS). Develop the BTCFS and ATCFS and compute for the respective PWs at EOY O using an MARR of 12%. Cash Flow for Income Taxes ($) Before-Tax Cash Flow ΕΟΥ Depreciation ($) Taxable Income ($) After-Tax Cash Flow ($) ($) [1] 1 [2] 2 [3] [4] 4 [5] [6] [7] 9 [8] 10 [10] PW(0) using MARR [9] [11] Based on Before-Tax Analysis, is this machinery worth investing in? ("YES"/"NO"} [12] Based on After-Tax Analysis, is this machinery worth investing in? ["YES"/NO")