Principles Of Taxation For Business And Investment Planning 2020 Edition
23rd Edition
ISBN: 9781259969546
Author: Sally Jones, Shelley C. Rhoades-Catanach, Sandra R Callaghan
Publisher: McGraw-Hill Education
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Chapter 3, Problem 15AP
Corporation ABC invested in a project that will generate $60,000 annual after-tax cash flow in years 0 and 1 and $40,000 annual after-tax cash flow in years 2, 3, and 4. Compute the
- a. ABC uses a 10 percent discount rate.
- b. ABC uses a 7 percent discount rate.
- c. ABC uses a 4 percent discount rate.
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Students have asked these similar questions
Mario Kat, Inc plans a new project. Calculate its IRR. Assume that its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?
Answer each independent question, (a) through (e), below.
a. Project B costs $10,000 and will generate after-tax cash inflows of $900 in year 1, $2,400 in year 2, $4,300 in year 3, $3,400 in year 4, and $4,300 in year 5. What is the payback period (in years) for this investment assuming that the cash inflows occur evenly throughout the year? (Round your answer to 2 decimal places.)
b. Project C costs $10,000 and will generate net cash inflows of $4,750 before taxes for 5 years. The firm uses straight-line depreciation with no salvage value and is subject to a 20% tax rate. What is the payback period under the assumption that all cash inflows occur evenly throughout the year? (Round your answer to 2 decimal places.)
Prominent Sdn Bhd invested in two projects, project Alpha and project Beta. The projects areindependent of each other. The following schedule shows the cash flows for each project.
Year
Project Alpha
Project Beta
0
-10,000
-10,000
1
5,000
1,000
2
4,000
2,000
3
2,000
2,000
4
2,000
3,000
5
1,000
6,000
The following schedule shows the profit for each project.
Year
Project Alpha
Project Beta
0
0
0
1
2,000
1,000
2
2,000
1,000
3
2,000
2,000
4
2,000
2,000
5
2,000
4,000
The discount rate is 10%.Questions:a) Appraise the projects using the Accounting Rate of Return. b) Appraise the projects using the Payback Period. c) Appraise the projects using the Net Present Value.
Note: Please state all relevant formulas in your appraisal
Chapter 3 Solutions
Principles Of Taxation For Business And Investment Planning 2020 Edition
Ch. 3 - Does the NPV of future cash flows increase or...Ch. 3 - Explain the relationship between the degree of...Ch. 3 - Does the after-tax cost of a deductible expense...Ch. 3 - Prob. 4QPDCh. 3 - Prob. 5QPDCh. 3 - Prob. 6QPDCh. 3 - Prob. 7QPDCh. 3 - Which type of tax law provision should be more...Ch. 3 - In the U.S. system of criminal justice, a person...Ch. 3 - Identify two reasons why a firms actual marginal...
Ch. 3 - Prob. 11QPDCh. 3 - Prob. 12QPDCh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Use a 5 percent discount rate to compute the NPV...Ch. 3 - Consider the following opportunities: Opportunity...Ch. 3 - Prob. 6APCh. 3 - Refer to the income tax rate structure in the...Ch. 3 - Prob. 8APCh. 3 - Company N will receive 100,000 of taxable revenue...Ch. 3 - Prob. 10APCh. 3 - Investor B has 100,000 in an investment paying 9...Ch. 3 - Firm E must choose between two alternative...Ch. 3 - Company J must choose between two alternate...Ch. 3 - Firm Q is about to engage in a transaction with...Ch. 3 - Corporation ABC invested in a project that will...Ch. 3 - Prob. 16APCh. 3 - Investor W has the opportunity to invest 500,000...Ch. 3 - Prob. 18APCh. 3 - Prob. 19APCh. 3 - Prob. 20APCh. 3 - Prob. 21APCh. 3 - Prob. 1IRPCh. 3 - Firm V must choose between two alternative...Ch. 3 - Prob. 3IRPCh. 3 - Refer to the facts in problem 3. Company WB is...Ch. 3 - Prob. 5IRPCh. 3 - Prob. 6IRPCh. 3 - Prob. 7IRPCh. 3 - Prob. 8IRPCh. 3 - Prob. 9IRPCh. 3 - Prob. 1TPCCh. 3 - Firm D is considering investing 400,000 cash in a...
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