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?

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?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.15E

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