Calculate operating cash flow using the four different approaches described in the chapter and verify that the answer is the same in each case.
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- Please do your own work, don't copy from the internet Q6) Cash flow (LO12-2) Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 24 percent tax bracket. Compute its cash flow using the following format: Earnings before depreciation and taxes _____ Depreciation _____ Earnings before taxes _____ Taxes @ 24% _____ Earnings after taxes _____ Depreciation _____ Compute the cash flow for the company if depreciation is only $20,000. How much cash flow is lost due to the reduced depreciation from $40,000 to $20,000?Suppose you currently earn taxable income of $100,000 per year. You are subject to an MTR of 50 percent. Currently, your ATR is 35 percent. Calculate your annual tax. Calculate the extra tax that you would pay per year if your annual income increased to $110,000. What is your ATR when your annual income is $110,000?Barbara Thompson is considering the purchase of a piece of business rental property containing stores and offices at a cost of $350,000. Barbara estimates that annual receipts from rentals will be $55,000 and that annual disbursements. other than income taxes, will be about $18,000. The property is expected to appreciate at the annual rate of 5%. Barbara expects to retain the property for 20 years once it is acquired. Then it will be depreciated on the basis of the 39-year real-property class (MACRS), assuming that the property would be placed in service on January 1. Barbara's marginal tax rate is 30%, and her MARR is 10%. What would be the minimum annual total of rental receipts that would make the investment break even?
- Omar Shipping Company bought a tugboat for $75,000 (year 0) and expected to use it for five years after which it will be sold for $12,000. Suppose the company estimates the following revenues and expenses from the tugboat investment for the first operating year: If the company pays taxes at the rate of 30% on its taxable income, what is the net income during the first year? (a) $28,700(b)$81,200(c) $78,400(d) $25,9001. Hula hoop fabrications cost $100 each. The H2H company is trying to decide how many of these machines to buy. The number of hoops for each year and for each level of capital stock shown as follows: Hula Hoop have a real value of $1 each. There is no other costs besides the cost of fabricators. a. Find the expected future marginal product of capital (in terms of dollar) for each level of capital. b. If the real interest rate is 12% per year, and the depreciation rate of capital is 20% per year, find the user cost of capital (in dollar per fabricator per year). How many fabricators should H2H buy?Halloween, Inc., is considering a new product launch. The firm expects to have an annual operating cash flow of $9.6 million for the next 9 years. The discount rate for this project is 13 percent for new product launches. The initial investment is $39.6 million. Assume that the project has no salvage value at the end of its economic life. a. What is the NPV of the new product? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) b. After the first year, the project can be dismantled and sold for $26.6 million. If the estimates of remaining cash flows are revised based on the first year’s experience, at what level of expected cash flows does it make sense to abandon the project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
- Charles lives in Houston and operates a small company selling drones. On average, he receives $849,000 per year from selling drones. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $390,000. He also pays several utility companies, as well as his employees wages totaling $359,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $72,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Charles does not operate the drone business, he can work as a programmer and earn a yearly salary of $25,000 with no additional monetary costs, and rent out his storefront at the $72,000 per year rate. There are no other costs faced by Charles in running this drone company. Identify each of Charles’s costs in the following table as either an implicit cost or an explicit cost of selling drones. Implicit Cost Explicit Cost The salary Charles could…EFG Corporation ("EFG") is a Canadian-controlled private corporation and has correctly calculated its net income for tax purposes to be $857,000 for the year ending December 31, 2019, as shown below: Business income $710,000 Taxable capital gains $80,000 Taxable dividends from Canadian public corporations $32,000 Taxable dividends from XYZ Inc. $5,000 Interest on five-year bonds $30,000 Net income for tax purposes $857,000 EFG owns 100% of the shares of XYZ. For the current year, XYZ claimed the small-business deduction on $80,000 of its active business income. Additional information: • EFG made charitable donations of $45,000 during the year • Net capital losses were $35,000 as of January 1, 2019 • Non-capital losses were $50,000 as of January 1, 2019 • At the end of the previous year, EFG had a balance in its non-eligible refundable dividend tax on hand (RDTOH) account of $18,000 and GRIP of $2,000. XYZ received a dividend refund of $1,917 from its non-eligible RDTOH when it paid…Calculate the net present value (NPV) before tax of investment A: a factory. Base your calculation on the following information: The investment cost is paid in full in quarter 0, and the cost of the factory is 100000. The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0 Only Basic jetpacks should be manufactured at the factory throughout its lifetime. There is no investment in research to streamline production or material consumption. Suppose the quarterly demand in the market is constant and given at P = 228 - 0.007 * Q, where P is price and Q is the number of jetpacks in demand. There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 193 each. You produce as much as you sell. The costs associated with the quarterly production at the factory are given at K = 158 * Q + 20000, where 158 * Q is direct labor cost and materials, and 20000 is quarterly maintenance…
- The tax rates for a particular year are shown below: Taxable Income Tax Rate $0 – 50,000 15 % 50,001 – 75,000 25 % 75,001 – 100,000 34 % 100,001 – 335,000 39 % What is the average tax rate for a firm with taxable income of $124,513?Explain why the after-tax cashflow is the cash inflow in this project.Cori's Meats is looking at a new sausage system with an installed cost of $495,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $73,000. The sausage system will save the firm $175,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $32,000. If the tax rate is 23 percent and the discount rate is 10 percent, what is the NPV of this project?