Equipment with a book value of $11,000 will be sold at the end of a project for a salvage value of $8,000. The tax rate is 30%. What is the tax effect resulting from the profit or loss from the sale of the equipment (where a negative number means tax is payable and a positive number means that there is a tax shield)? Question 2Answer a. $900 b. $-900 c. $3300 d. $-3300

Equipment with a book value of $11,000 will be sold at the end of a project for a salvage value of $8,000. The tax rate is 30%. What is the tax effect resulting from the profit or loss from the sale of the equipment (where a negative number means tax is payable and a positive number means that there is a tax shield)? Question 2Answer a. $900 b. $-900 c. $3300 d. $-3300

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 6PROB

See similar textbooks

Similar questions

The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Nicholas Health Systems recently reported an EBITDA of $25.0 million and net income of $15.8 million. It had $2.0 million of interest expense, and its federal tax rate was 21% (ignore any possible state corporate taxes). What was its charge for depreciation and amortization?
This question is based on the following in formation: An investment is Machinery costing P 250,000 with a 4-year life and no salvage value is expected to produce the following net income after taxes of 30%: End of year 1 P 17,000 2 22,000 3 25,000 4 26,000 How much is the annual tax shield?How much is the annual tax shield?A. P 17,580B. P 17,850C. P 18,570D. P 18,750What is the ROI (using the cash income)? A. 6.3%B. 9%C. 31.3%D. 34%
Your company, RMU Inc., is considering a new project whose data are shown below. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the project's Year 1 cash flow? Sales revenues $24,950 Operating costs $13,450 Tax rate 25.0% a. $8,625 b. $14,375 c. $11,500 d. $5,263 e. $9,200
Consider a profitable company with an asset that cost $3 million that is depreciated straight line to zero over. It’s 11 year depreciable tax life. The asset is to be used in a three year project at the end of the project. The asset can be sold for 362,000. If the relevant tax rate is 18%, what is the after tax cash flow from the sale of this asset (after tax salvage)?