coaches by 750 units per year. Whatfigure when evaluating this project? Why?3. Calculating Projected Net Income A proposed new investment has projectedsales of $635,000. Variable costs are 40 percent of sales, and fixed costs are$168,000; depreciation is $83,000. Prepare a pro forma income statementassuming a tax rate of 23 percent. What is the projected net income?is the amo0 24. Calculating OCF Consider the following income statement:02$537,200Sales346,800Costs94,500Depreciation?EBIT?Taxes (21%)Net incomeFill in the missing numbers and then calculate the OCF. What is the depreci-ation tax shield?5. Calculating Depreciation A piece of newly purchased industrial equipmentcosts $745,000 and is classified as seven-year property under MACRS.Calculate the annual depreciation allowances and end-of-the-year book valuesfor this equipment..0 26. Calculating Salvage Value Consider an asset that costs $635,000 and isdepreciated straight-line to zero over its eight-year tax life. The asset is to beused in a five-year project; at the end of the project, the asset can be sold for$105,000. If the relevant tax rate is 22 percent, what is the aftertax cash flow0 2from the sale of this asset?

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Asked Nov 19, 2019
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Number 6 

coaches by 750 units per year. What
figure when evaluating this project? Why?
3. Calculating Projected Net Income A proposed new investment has projected
sales of $635,000. Variable costs are 40 percent of sales, and fixed costs are
$168,000; depreciation is $83,000. Prepare a pro forma income statement
assuming a tax rate of 23 percent. What is the projected net income?
is the amo
0 2
4. Calculating OCF Consider the following income statement:
02
$537,200
Sales
346,800
Costs
94,500
Depreciation
?
EBIT
?
Taxes (21%)
Net income
Fill in the missing numbers and then calculate the OCF. What is the depreci-
ation tax shield?
5. Calculating Depreciation A piece of newly purchased industrial equipment
costs $745,000 and is classified as seven-year property under MACRS.
Calculate the annual depreciation allowances and end-of-the-year book values
for this equipment.
.0 2
6. Calculating Salvage Value Consider an asset that costs $635,000 and is
depreciated straight-line to zero over its eight-year tax life. The asset is to be
used in a five-year project; at the end of the project, the asset can be sold for
$105,000. If the relevant tax rate is 22 percent, what is the aftertax cash flow
0 2
from the sale of this asset?
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coaches by 750 units per year. What figure when evaluating this project? Why? 3. Calculating Projected Net Income A proposed new investment has projected sales of $635,000. Variable costs are 40 percent of sales, and fixed costs are $168,000; depreciation is $83,000. Prepare a pro forma income statement assuming a tax rate of 23 percent. What is the projected net income? is the amo 0 2 4. Calculating OCF Consider the following income statement: 02 $537,200 Sales 346,800 Costs 94,500 Depreciation ? EBIT ? Taxes (21%) Net income Fill in the missing numbers and then calculate the OCF. What is the depreci- ation tax shield? 5. Calculating Depreciation A piece of newly purchased industrial equipment costs $745,000 and is classified as seven-year property under MACRS. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. .0 2 6. Calculating Salvage Value Consider an asset that costs $635,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $105,000. If the relevant tax rate is 22 percent, what is the aftertax cash flow 0 2 from the sale of this asset?

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Expert Answer

Step 1

Computation of after-tax cash flow:

Hence, the after-tax cash flow is $134,287.50.

...
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A Particulars Amount Cost of the asset 635000 Life of the asset 4 Annual depreciation 5 Useful period of an asset Accumulated depreciation 7 Book value 79375 5 396875 238125 8 Sale vahue 105000 134287.50 9 After-tax salvage value

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