Problem 12-2 Spreadsheet Problem: PV of Depreciation Tax Benefits (LG12-4)Your company is considering a new project that will require $855,000 million of new equipment at the start of the project. Theequipment will have a depreciable life of 9 years and will be depreciated to a book value of $144,000 using straight-line depreciation.Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 12 percent, and the firm's tax rate is 21percent.Estimate the present value of the tax benefits from depreciation.Note: Round your answer to 2 decimal places.Present valueI

Cost of new equipment = $ 855,000Depreciable life of equipment in years = 9Book value of new…

Answered: Problem 12-2 Spreadsheet Problem: PV of…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 1PROB

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7.2 Project Beta is a 6-year project which requires an initial outlay of $4,000. This outlay will be depreciated using straight-line depreciation over the life of the project. It will generate incremental revenue of $2000 per year and incremental costs (excluding depreciation) of $500. The tax rate is 30%. What is the annual depreciation amount? a. $867 b. $667 c. $1533 d. $1333 Clear my choice
Ch 6. Seeing Red has a new project that will require fixed assets of $935,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company has a tax rate of 28 percent. What is the depreciation tax shield for Year 3? Round to the nearest cent and format answer as "XX,XXX.XX"
Problem 12-8 After-Tax Cash Flow from Sale of Assets (LG12-4) Your firm needs a computerized machine tool lathe which costs $46,000 and requires $11,600 in maintenance for each year of its 3- year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 35 percent and a discount rate of 13 percent. If the lathe can be sold for $4,600 at the end of year 3, what is the after-tax salvage value? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Salvage value after $ 1,430.65 tax
es Problem 12-27 (Algo) MACRS depreciation and net present value [LO12-4] Universal Electronics is considering the purchase of manufacturing equipment with a 10-year midpoint in its asset depreciation range (ADR). Carefully refer to Table 12-11 to determine in what depreciation category the asset falls. (Hint: It is not 10 years.) The asset will cost $220,000, and it will produce earnings before depreciation and taxes of $72,000 per year for three years, and then $35,000 a year for seven more years. The firm has a tax rate of 25 percent. Assume the cost of capital is 14 percent. In doing your analysis, if you have years in which there is no depreciation, merely enter a zero for depreciation. Use Table 12-12. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a. Calculate the net present value. Note: Do not round intermediate calculations and round your answer to 2 decimal places. Net present value b. Based on the…
7 Your company is considering a new project that will require $978.000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $148.000 using straight line depreciation Neither bonus depreciation nor Section 179 expensing will be used The cost of capital is 13 percent, and the firm's tax rate is 21 percent Estimate the present value of the tax benefits from depreciation (Round your answer to 2 decimal places)
Project Section 1: You are considering buying an industrial equipment whose price is 445000. The equipment is expected to earn an annual revenue of $150,000. The equipment will be depreciated under MACRS as a five-year recovery property. The equipment will be used for seven years, at the end of which time, you can sell it for $50,000. Your company's marginal tax rate is 35% over the project period. Perform the following: a) Determine the net after-tax cash flows for each period over the project life. b) Net present worth assuming company MARR 15% . c) Annual equivalent cash flow company MARR 15%. = =
Problem 3 A piping contractor is considering the purchase of a number of pipe laying machines for a project that will last for 6 years. Each machine will cost $ 50,000.00 and have no salvage value at the end of the project. In determining whether to make this purchase, straight line deprecation can be used and an annual income tax on profits of of 34%, and an after-tax MARR is 8%. What is the minimum annual net benefit before taxes that must be generated by the each machine in order to justify its purchase? Answer:
3 Problem 16-142 (Algo) Tanner Corporation is considering the acquisition of... nner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs $55,000 before income taxes. The machine costs $150,000, has a useful life of five years, and no salvage value. Tanner uses raight-line depreciation on all assets, is subject to a 10% Income tax rate, and has an after-tax hurdle rate of 10%. Year 123456 FV of $1 at FV of an ordinary annuity PV of $1 at PV of an ordinary annuity at 10% at 10% 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.000 2.100 3.310 4.641 6.105 7.716 A. Rate of return B. Net present value 10% 0.909 0.826 0.751 0.683 0.621 0.564 equired: Compute the machine's accounting rate of return on the initial investment. . Compute the machine's net present value. Note: For all requirements, do not round Intermediate calculations. Round final answers to whole number. % 0.909 1.736 2.487 3.170 3.791 4.355 www
Question list Question 1 Question 2 Question 3 Question 4 O Question 5 O Question 6 Question 7 Question 8 (Calculating changes in net operating working capital) Duncan Motors is introducing a new product and has an expected change in net operating income of $290,000. Duncan Motors has a 36 percent marginal tax rate. This project will also produce $51,000 of depreciation per year. In addition, this project will cause the following changes in year 1: Without the Project $34,000 27.000 53,000 With the Project $20,000 36.000 91,000 Accounts receivable Inventory Accounts payable (Click on the loon in order to copy ds contents into a spreadsheer) What is the project's free cash flow in year 17 The free cash flow of the project in year 1 is $. (Round to the nearest dolar) Help me solve this View an example Get more help. COLD Clear all Check answer
Question 9 Daily Enterprises is purchasing a $9.6 million machine. It will cost $52,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.1 million per year along with incremental costs of $1.1 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine? The free cash flow for year 0 will be $nothing. (Round to the nearest dollar.) The free cash flow for years 1–5 will be $_______________________ (Round to the nearest dollar.)
6.10 Calculating Salvage Value An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $7.6 million and will be sold for $1.4 million at the end of the project. If the tax rate is 21 percent, what is the after tax salvage value of the asset?

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