A proposed expansion project is expected to increase sales by $89,000 and increase cash expenses by $44,000. The project will require $60,000 of fixed assets that will be depreciated using straight-line depreciation to a zero book value over the five-year life of the project. The store has a marginal tax rate of 30 percent. What is the operating cash flow of the project using the tax shield approach? Ignore bonus depreciation.
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A proposed expansion project is expected to increase sales by $89,000 and increase cash expenses by $44,000. The project will require $60,000 of fixed assets that will be
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- A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and will be depreciated using straight- line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? O $9,350 O $9,700 O $8,650 O $5,850SuperStores, Inc is considering expanding retail operations. Project X involves opening a new store in a nearby city, while Project Y involves upgrading the company's existing retail operations. Both projects require an initial investment of $100,000 and have the same expected life of 5 years and can be depreciated down to zero using straight-line depreciation. The before-tax cash flows of each project are listed below: Year Project X Project Y 1 25,000 10,000 2 25,000 20,000 3 25,000 30,000 4 25,000 40,000 5 25,000 50,000 If your tax rate is 23 percent and your discount rate is 9 percent, compute the after-tax cash flows for each project, then use the cash flow information to calculate the NPV and IRR for both machines. Which do you prefer? Which capital investment would you consider to be riskier? Comment on how your assessment of the riskiness of the two projects would affect your decision to invest?a project will increase sales by $92,800 and cash expenses by $53,200. The project will cost $89,000 and be depreciated using straight-line depreciation to a book value of zero over the 4-year life of the project. The tax rate is 35 percent. what is the operating cash flow (OCF) of the project using the tax shield approach? A) $35,170.50 B)$28,650.00 C)$42,350.50 D)$37,672.50 E)$33,527.50
- Cendrawasih Inc. is considering replacing the equipment it uses to produce crayons. The equipment would cost RM1.37 million, have a 12-year life, and lower manufacturing costs by an estimated RM304,000 a year. The equipment will be depreciated using straight-line depreciation to a book value of zero. The required rate of return is 15 percent and the tax rate is 35 percent. Determine the net income from this proposed project.The Gamma Inc. is planning to spend P600,000 for a machine that will depreciate on a straight-line basis over a ten-year period with no terminal disposal price. The machine will generate cash flow from operations of P120,000 a year. Ignoring income taxes, what is the accounting rate of return on the net initial investment? (in percentage)Inc is considering expanding retail operations. Project X involves opening a new store in a nearby city, while Project Y involves upgrading the company's existing retail operations. Both projects require an initial investment of $100,000 and have the same expected life of 5 years and can be depreciated down to zero using straight-line depreciation. The before-tax cash flows of each project are listed below: Year Project X: Project Y: 1 25,000 10,000 2 25,000 20,000 3 25,000 30,000 4 25,000 40,000 5 25,000 50,000 If your tax rate is 23 percent and your discount rate is 9 percent, compute the after-tax cash flows for each project, then use the cash flow information to calculate the NPV and IRR for both machines.
- Shelly's Boutique is evaluating a project which will increase annual sales by $70,000 and annual costs by $40,000. The project will initially require $100,000 in fixed assets which will be depreciated straight-line to a zero book value over the 5-year life of the project. The applicable tax rate is 34 percent. What is the operating cash flow for this project?you are trying to decide whether to accept or reject a one-year project. The project is estimated to generate $5,000 in incremental gross profit, which includes $200 in depreciation. Incremental SG&A expense is $400. At a 35% tax rate,what would be the after-tax incremental cash flow ?METL is evaluating a project projected to have a 7-year life. The initial investment of $4.2 million will be depreciated to zero using straight-line over the project life. The project is expected to create incremental sales of $2.4 million per year and incremental expenses of $1.4 million per year. What is the incremental after-tax operating cash flow (OCF) associated with this project if METL's tax rate is 32%? Enter answer in dollars, rounded to the nearest dollar.
- (Ignore income taxes in this problem.) Your Company is considering investing in equipment with an eight-year useful life. Using the company's 12% discount rate, the net present value of the cash flows associated with just the tangible costs and benefits is ($208,985). This does not include any estimate of the cash flows associated with the intangible benefits that management is sure are associated with the project. How large would the annual net cash inflows from the intangible benefits have to be to make this a financially acceptable investment? O$ 42,066 O$ 39,224 O $517,290 O $452,356 O $208,985(Ignore income taxes in this problem.) Your Company is considering a project that would require an initial investment of $720,000 and would have a useful life of 8 years. The annual cash receipts would be $178,000 and the annual cash expenses would be $49,000. The salvage value of the assets used in the project would be $45,000. The company uses a discount rate of 10%. Compute the net present value of the project. a $145,590 b $250,645 c ($10,770) d ($31,785) e ($15,770)Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 4-year tax life, after which it will be worthless, and it will be depreciated by the straight-line method over 4 years. Revenues and other operating costs are expected to be constant over the project's 4-year life. What is the project's Year 1 cash flow? Equipment cost (depreciable basis) Straight-line depreciation rate Sales revenues, each year Operating costs (excl. deprec.) Tax rate a. $27,500 b. $28,438 c. $22,750 d. $30,333 e. $21,000 $65,000 25.00% $60,000 $25,000 40.0%