Gator Bicycles just bought a new brake calibration machine that is expected to generate 124,000 in new revenues each of the next four years without increasing cash operating costs. The machine will be depreciated according to theMACRS 3-year dass of assets, and its depreciable bass is 196,000. af Gator's marginal tax rate is 35 percent, what are the annual supplemental operating cash flows attributed to the machine? Round your answers to the nearestdollaYear Supplemental operating CF12X$E1$

Variables in the question:New revenue each of the next 4 years=$24000No increase in cash operating…

Answered: atur Bicydes just bought a new brake…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 7PROB

See similar textbooks

Similar questions

Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required: 1. Patz Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be 800,000 per year. The system costs 4,000,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system? 2. Sterling Wetzel has just invested 270,000 in a restaurant specializing in German food. He expects to receive 43,470 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Sterling make a good decision?
Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Degemes Corporation is considering investing $33,000 in a new machine . The machine is expected to last five years and to have a residual value of \$8.000 Annual tax net cash inflow from the machine is expected to be $ 7,000 . Degernes Corporation's income tax rate is 40% Calculate the accounting rate of return (Round your answer to the nearest tenth of a percent ) (Note : The accounting rate of return is called the unadjusted rate of return in your textbook ) 9.8% 20.5% 5.9 % None of the listed choices are correct 9.6%
Gator Bicycles just bought a new brake calibration machine that is expected to generate $36,000 in new revenues each of the next four years without increasing cash operating costs. The machine will be depreciated according to the MACRS 3- year class of assets, and its depreciable basis is $144,000. If Gator's marginal tax rate is 35 percent, what are the annual supplemental operating cash flows attributed to the machine? Round your answers to the nearest dollar. show the Excel formulas and step-by-step process Year Supplemental operating CF 1 2 3 4 $ $ $ $
Tripp Industries is considering buying a new recycling system. The new recycling system would be purchased today for $7,760.00. It would be depreciated straight-line to $1,060.00 over 2 years. In 2 years, the recycling system would be sold and the after-tax cash flow from capital spending in year 2 would be $1,290.00. The recycling system is expected to reduce costs by $2,810.00 in year 1 and by $8,610.00 in year 2. If the tax rate is 59.00 % and the cost of capital is 7.16%, what is the net present value of the new recycling system project? $426.49 (plus or minus $10) $331.08 (plus or minus $10) $1,078.26 (plus or minus $10) -$2,115.95 (plus or minus $10) None of the above is within $10 of the correct answer
Degernes Corporation is considering investing $33,000 in a new machine . The machine is expected to last five years and to have a residual value of net cash inflow from the machine is expected to be $ 7,000 . Degemes Corporation's income tax rate is 40 % Calculate the accounting rate of return ( Round your answer to the nearest tenth of a percent ) ( Note : The accounting rate of return is called the unadjusted rate of return in your textbook ) 9.8 % 20.5 % 5.9% None of the listed choices are correct 9.6 %
ABC is starting a new project. It will require new equipment costing 34. The project is expected to increase gross profits by 26 per year, starting at the end of the first year, with associated costs of 13 for each of those years. The machine is expected to have a working life of 7 years and will be depreciated over those 7 years. The marginal tax rate is 0.3. What are the incremental free cash flows associated with the new machine in year 2?
Johnnys lunches is considering purchasing a new, energy efficient grill. the grill will cost $34,000 and will be depreciated straightline over 3 years. it will be sold for scrap metal after 5 years for $8500. the grill will have no effect on revenues but will save Johnnys $17,000. the tax rate is 30%. a. what are the operating cash flows in each year? (years 1, 2, and 3) b. what are the total chash flows in each year? (years 0,1,2,3) c. assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
The owner of a bicycle repair shop forecasts revenues of $216000 a year. Variable costs will be $64,000 and rental costs for the shop are $44000 a year. Depreciation on the repair tools will be $24000 1. Prepare an income statement for the shop based on these estimates. The tax rate is 20% Calculate the operating cash flow for the repair shop using the 3 methods given below. Now calculate the operating cash flow 1. Dollars in Minus Dollars out 2. Adjusted accounting profit 3. After-tax operating cash flow
Kelly, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, compute the NPV of this investment and explain how the tax imposition would affect your NPV.
A gym owner is considering opening a location on the other side of town. The new facility will cost $1.38 million and will be depreciated on a straight-line basis over a 20-year period. The new gym is expected to generate $541,000 in annual sales. Variable costs are 52 percent of sales, the annual fixed costs are $86,900, and the tax rate is 34 percent. What is the operating cash flow?
The owner of a bicycle repair shop forecasts revenues of $240,000 a year. Variable costs will be $70,000, and rental costs for the shop are $50,000 a year. Depreciation on the repair tools will be $30,000. Prepare an income statement for the shop based on these estimates. The tax rate is 20%. Calculate the operating cash flow for the repair shop using the three methods given below: Dollars in minus dollars out. Adjusted accounting profits. Add back depreciation tax shield.

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

EBK CFIN

Finance

ISBN:

9781337671743

Author:

BESLEY

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

SEE MORE TEXTBOOKS