Consider the proposed capital investment in an engineering project.• Proposed capital investment: $105,000• Salvage value (end of year four): 0• Annual expenses per year. $20,000• Gross revenues per year: $55,000• Depreciation method: GDS• Property Class year. 3• Effective income tax rate (t): 35%• After-tax MARR (i): 10%• The study period is 4 years.determinea) After-tax AWb) annual equivalent EVAF

Consider the proposed capital investment in an engineering project. • Proposed capital investment: $105,000 • Salvage value (end of year four): 0 • Annual expenses per year: $20,000 Gross revenues per year: S55,000 Depreciation method: GDS • Property Class year. 3 • Effective income tax rate (t): 35% • After-tax MARR (i): 10% • The study period is 4 years. determine a) After-tax AW b) annual equivalent EVAF

Consider the proposed capital investment in an engineering project. • Proposed capital investment: $105,000 • Salvage value (end of year four): 0 • Annual expenses per year: $20,000 Gross revenues per year: S55,000 Depreciation method: GDS • Property Class year. 3 • Effective income tax rate (t): 35% • After-tax MARR (i): 10% • The study period is 4 years. determine a) After-tax AW b) annual equivalent EVAF

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

Chibitatat Corporation provided the following data for calendar year ending on December 31, 2020. Philippines (php) Abroad (php) Gross Income 4,000,000 2,000,000 Deductions 2,500,000 600,000 Income Tax Paid 150,000 If the corporation is a domestic corporation and it opts to claim the tax paid abroad as deductions from gross income, its income tax payable is:
Given: Before -Tax Cash Flow (BT-CF) for Kal Tech Systems in 2012 for an equipment that will be depreciated using the SL method with salvage value of $10,000. Year 0 1 2 3 4 5 BT-CF -$120,000 32,000 32,000 32,000 32,000 32,000 Market value - $36,000 What is the after-tax return if the company is in the 34% income tax bracket? The incremental tax rate is 34%. Also, it is known that the before-tax return is 16.65% Group of answer choices 9.65% 11.29% 10.16% 10.99%
The effective combined tax rate in a firm is 28%. An outlay of $2 million for certain new assets is under consideration. Over the next 9 years, these assets will be responsible for annual receipts of $650,000 and annual disbursements (other than for income taxes) of $225,000. After this time, they will be used only for stand-by purposes with no future excess of receipts over disbursements.(a) What is the prospective rate of return before income taxes?(b) What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 9 years?(c) What is the prospective rate of return after taxes if it is assumed that these assets must be written off for tax purposes over the next 20 years, using straight-line depreciation?
The effective combined tax rate in a firm is 28%. An outlay of $2 million for certain new assets is under consideration. Over the next 9 years, these assets will be responsible for annual receipts of $650,000 and annual disbursements (other than for income taxes) of $225,000. After this time, they will be used only for stand-by purposes with no future excess of receipts over disbursements. (a) What is the prospective rate of return before income taxes? (b) What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 9 years? (c) What is the prospective rate of return after taxes if it is assumed that these assets must be written off for tax purposes over the next 20 years, using straight-line depreciation? please solve it step by step
quipment associated with manufacturing small railcars had a first cost of $170,000 with an expected salvage value of $30,000 at the end of its 5-year life. The revenue was $630,000 in year 2, with operating expenses of $98,000. If the company’s effective tax rate was 36%, what would be the difference in taxes paid in year 2 if the depreciation method were straight line instead of Modified Accelerated Cost Recovery System (MACRS)? The MACRS depreciation rate for year 2 is 32%. The difference in taxes paid is determined to be $ .
An engineer who made an annual return of 8% after taxes on a stock investment was told by his accountant that this is equivalent to a 12% per year before-tax return. What percentage of taxable income is the accountant assuming will be taken by taxes?
An engineering firm purchased 25 years ago a mini power plant for Php 5.0 M. Other expenses including repairs amounted to Php 500,000. The mini power plant is up to next 25 years only and for the plant to operate. The salcage value is Php 500,000. Determine the depreciation charge during the 20TH and 40TH year. Also determine the book value at the end of 25th and 45th years if interest is 12% using a) Sum of the Years Digit method, b) Sinking Fund method and c) Double Declining Balance method . Pls show complete handwritten solution
A company with a 34% marginal income tax rate is considering the purchase of a $75,000 piece of equipment that is classified as 3-year property in the MACRS depreciation schedule. The equipment will provide the following estimated benefits in Year 1-5. Year Before-Tax Cash Flow 0 −$75,000 1 $10,000 2 $25,000 3 $50,000 4 $15,000 If the company purchases the equipment, how much income tax will it owe in Year 3? Group of answer choices $13,223 $17,000 $25,500 No income tax is owed
During one year a business had gross income of $3.2 million, operating expenses of $2.7 million excluding interest on loans, depreciation of $0.2 million, and no natural resource depletion. The company had one loan outstanding during the year. During the year, four quarterly payments of $55,000 ($40,000 of principal + $15,000 of interest) were made on the loan. What is the company's taxable income for the year? Group of answer choices $240,000 $245,000 $285,000 $300,000
A corporate expects to receive $36,144 each year for 15 years if a particular project is undertaken. There will be an initial investment of $100,705. The expenses associated with the project are expected to be $7,740 per year. Assume straight-line depreciation, a 15-year useful life, and no salvage value. Use a combined state and federal 48% marginal tax rate, MARR of 8%, determine the project's after-tax net present worth.
An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and money is worth 10% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes?
A factory has decided to purchase some new equipment for P600, 000. The equipment will be kept for 10 years before being sold. The estimated salvage value for depreciation purposes is to be P45,000. Using straight line method, what is the annual depreciation on the equipment? a. P55, 500 b. P50,000 c. P51,500 d. P52, 500