Year 1Year 2Year 3Year 4Sales (units)Sales price4,2004,1004,3004,400$29.82 $30.00Variable cost per unitFixed costs, excluding depreciationAccelerated depreciation rate$12.15 $13.45$41,000 $41,67033%45%$30.31 $33.19$14.02 $14.55$41,890 $40,10015%7%.DThis project will require an investment of $20,000 in new equipment. The equipment will have no salvage value at the end of the project's four-yearlife. Black Sheep Broadcasting pays a constant tax rate of 40%, and it has a required rate of return of 11%.When using accelerated depreciation, the project's net present value (NPV) isWhen using straight-line depreciation, the project's NPV isUsing thedepreciation method will result in the greater NPV for the project.No other firm would take on this project if Black Sheep Broadcasting turns it down. How much should Black Sheep Broadcasting reduce the NPV of thisproject if it discovered that this project would reduce one of its division's net after-tax cash flows by $600 for each year of the four-year project?$2,047$1,861$1,582$1,396

Step 1:Calculation of NPV under accelerated depreciation :NPV when using accelerated depreciation…

Answered: Year 1 Year 2 Year 3 Year 4 Sales…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Total sales 100,000; Returns sales 10,000; Total assets 500,000; Aggregate depreciation 50 thousand, the amount in dollars, calculate the turnover rate of operating assets Select one: a. 0.50 b. 0.20 c. 2.2 d. 300,000
QUESTION 9 Amotor vehicle which cost £30,000 is depreciated at 20% per annum using the reducing balance method. The depreciation charge for the second year would be: a. £13,800 b.E8,000 c. £4,800 24,000x20%=£4,800 d.£7,200
. Year 0 1 2 3 4 5 Unit Price - $105 $110 $1 15 $120 $125 Units Sold - 900 1000 1100 1200 1300 Net Sales - Variable Costs - $54 ,000 $60,000 $66,000 $72,000 $78,000 Fixed Costs - $15,000 $15,750 $16,538 $17 ,364 $18,233 Depreciation - $10,000 $10, 000 $10,000 $10,000 $10,000 PBIT - Tax@40% - NOPAT - Adjustments: Add back Depreciation - CapEx -$100,000 --- - - Salvage value -- --- $40,000 Net cash flow Cumulative cash flow Use an Excel spreadsheet to graph the cumulative cash flow.
Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs except depreciation Accelerated depreciation rate $41,000 33% $41,670 45% $41,890 15% $40,100 7% This project will require an investment of $25,000 in new equipment. The equipment will have no salvage value at the end of the project's four-year life. Fox pays a constant tax rate of 40%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be when using accelerated depreciation. Determine what the project's net present value (NPV) would be when using accelerated depreciation. (Note: Round your intermediate calculations to the nearest whole number.)
Initial Equipment Cost, $M 12.0 Depreciation, % 75.00% Current Equipment Value, $M 4.0 Marginal Tax Rate 40.00% Current Book Value, $M ? Profit/Loss On Sale, $M ? Taxes Owed (Saved) On Sale, $M ? After-Tax Net Salvage Value, $M ?
Prior to adjustment at the end of the year, the balance in Trucks is $405,400 and the balance in Accumulated Depreciation-Trucks is $120,280. Details of the subsidiary ledger are as follows: Accumulated Miles Estimated Estimated Depreciation Operated Truck Residual Useful at Beginning During No. Cost Value Life of Year Year 1 $84,500 $12,675 210,000 miles 31,500 miles 2 119,900 14,388 270,000 $23,980 27,000 3 93,500 13,090 207,000 $74,800 20,700 4 107,500 12,900 360,000 $21,500 43,200 a. Determine for each truck the depreciation rate per mile and the amount to be credited to the accumulated depreciation section of each subsidiary account for the miles operated during the current year. Keep in mind that the depreciation taken cannot reduce the book value of the truck below its residual value. Round the rate per mile to two decimal places. Enter all values as positive amounts. Credit to Rate per Mile Miles Accumulated Truck No. (in cents) Operated Depreciation 1 2$ 31,500 2 27,000 2$…
Problem 1Purchase price of raw materials P100,000Rebates on raw material purchases 2,000Import taxes 17,000Local taxes paid in relation to the purchase 1,500Freight-in 5,00012% VAT on the purchase price 12,000Interest expense related to the purchase 3,200Utilities used on factories…
MACRS Year 0 Depreciation Rate 33.33% $55,998 $79,608 $57,962 A machine is purchased for $850,000 and is used through the end of Year 2. The machine will be depreciated using the 3-Year MACRS schedule in the table above. At the end of Year 2, the machine is sold for $75,000. What is the after-tax cash flow from the sale of the machine at the end of Year 2 if the firm's marginal tax rate is 35%? $62,985 $75,000 Project Year Year 1 44.45% $70,795 Year 2 14.81% Year 3 7.41%
Net Salvage Value Initial Equipment Cost, $M 55.0 Depreciation, % 80.00% Current Equipment Value, $M 9.0 Marginal Tax Rate 35.00% Current Book Value, $M Profit/Loss On Sale, $M Taxes Owed (Saved) On Sale, $M After-Tax Net Salvage Value, $M
Problem 6Four, Inc. provided the following balances at the end of the current year:Wasting asset, at cost P20,000,000Accumulated depletion 2,500,000Share capital 50,000,000Capital liquidated 1,800,000Retained earnings 1,500,000Depletion based on 50,000 units at P20 per unit 1,000,000Inventory of resource deposit 100,000Required:a. Compute the maximum dividend that can be declared.b. Prepare the journal entry to record the declaration of P2,000,000 dividend.
Problem 9Hilarious Company provided the following data pertaining to machinery on the date of revaluation: Cost Replacement costMachinery 4, 500, 000 7, 500, 000Accumulated depreciation 900, 000 Age of asset 3 yearsRevised Life of the asset 10 years Required:1. Appreciation or revaluation increase2. Carrying amount3. Depreciated replacement cost4. Revaluation surplus5. What is the original life of the asset?6. Prepare the journal entry to record the revaluation 7. What is/are the rules in solving the problem?
Calculate depreciation on 28 February 2011 at 20% pa. on cost price BASELINE ASSESSMENT-CALCULATION OF DEPRECIA AT COST PRICE ACTIVITY 2 ACTIVITY 2.1 INFORMATION The financial year ends on 28 February each year. Bought a delivery van for R30 000 on 1 March 2010. REQUIRED ANSWER

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