vaibhavsubject-Accounting Firm L has $750,000 to invest and is considering two alternatives. Investment A would pay 6 percent ($45,000 annual before-tax cashflow). Investment B would pay 4.8 percent ($36,000 annual before-tax cash flow). The return on Investment A is taxable, while thereturn on Investment B is tax exempt. Firm L forecasts that its 21 percent marginal tax rate will be stable for the foreseeable future.Required:a. Compute the explicit tax and implicit tax that Firm L will pay with respect to Investment A and Investment B.b1. What is the annual after-tax cash flow for Investment A?b2. What is the annual after-tax cash flow for Investment B?b3. Which investment results in the greater annual after-tax cash flow?Complete this question by entering your answers in the tabs below.Req A Req B1 and B2Compute the explicit tax and implicit tax that Firm L will pay with respect to Investment A and Investment B.Explicit taxImplicit taxReq 83Investment AInvestment BReg AReq B1 and B2 >

After-tax annual cash flow refers to teh cash generated…

Answered: Firm L has $750,000 to invest and is…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter4: Gross Income: Concepts And Inclusions

Section: Chapter Questions

Problem 29P

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The tax on $2,600 of profit on a capital asset is deferred. A person in a 40 percent tax bracket will have to pay what amount of taxes when the asset is sold? (Round your answer to the nearest whole number.)
Specialty Corp is a cash basis calendar-year taxpayer. The corporation has a 25 percent marginal tax bracket this year. It will receive an additional $5,000 this year if it bills its customers at the beginning of December. But if it bills its customers at the end of December, it will not receive the $5,000 until January of next year. If Specialty Corp’s marginal tax rate next year is estimated to be 15 percent, when would the company most likely bill its customers? Specialty Corp. would bill its customers at the beginning of December. Specialty Corp would bill its customers in the middle of December Specialty Corp would bill its customers at the end of December. It will not matter when the company bills its customers for tax purposes
Hopkins Company has taken a position in its tax return to claim a tax credit of $70,000 (direct reduction in taxes payable) and has determined that it is "more likely than not" that the tax position will be sustained. The tax credit would be a direct reduction in current taxes payable. Hopkins believes the likelihood that a $70,000, $42,000, or $14,000 tax benefit will be sustained is 20%, 40%, and 40%, respectively. What is the amount of the additional projected liability that should be recognized? additional projected liability
Specialty Corp is a cash basis calendar-year taxpayer. The corporation has a 25 percent marginal tax bracket this year. It will receive an additional $5,000 this year if it bills its customers at the beginning of December. But if it bills its customers at the end of December, it will not receive the $5,000 until January of next year. If Specialty Corp’s marginal tax rate next year is estimated to be 34 percent, when would the company most likely bill its customers? Specialty Corp. would bill its customers at the end of December. Specialty Corp. would bill its customers at the beginning of December. Specialty Corp. would defer billing its customers until next year. Specialty Corp. would bill its customers in the middle of December.
Celtic Inc. is considering a 16-year project that will generate before tax cash flow of $18,000 peryear for 16 years. The project requires a machine that costs $96,000. The CCA rate is 20% andthe salvage value is $9,600. Celtic has cash of $66,000 and needs to borrow the balance at 6%interest rate to purchase the machine. Celtic is required to repay $10,000 at year 4 and theremaining balance at year 16. The corporate tax rate is 30%.If the weighted average cost of capital is 11% and the machine is the only asset in the assetclass, calculate the NPV of the project using the WACC approach.
Can you help in calculating the NPV for this ? Consider the following data - A machine costs $600 today (year 0). Assume this investment is fully tax-deductible, as stipulated by the new US corporate tax code of 2018. - This company has current pre-tax profits from other projects that are greater than $600, so it can take full advantage of the investment tax break above in year 0. - The machine will generate operating profits before depreciation (EBITDA) of $312 per year for 5 years. The first cash flow happens one year after the machine is put in place (year 1). - Depreciation is not tax-deductible. Notice that you do not need to calculate depreciation at all to solve this problem since it has no effect on taxes. - The tax rate is 21%…
Perkin Corporation has determined that it qualifies for a tax credit in the amount of $120,000. For the current year, it has tax liability before credits of $75,000. It expects at least that amount of tax liability next year. Required: If the excess credit is not refundable but may be carried forward, calculate the value of the credit. Assume Perkins uses a 4 percent discount rate to calculate present value. If the excess credit is refundable, what is the value of the credit?
Bronco Corp is considering a new investment. The Investment will cost the firm $35,000 now and will be depreciated straight line to $0 over the 4-year life of the project. If this project goes forward, it will also require $450 in additional Net Working Capital for the project starting now and will not be needed at the end of the project. The investment can be sold at the end of its life for $3,000. The annual sales and costs are provided in the table below. The tax rate is 21% and the firm has no debt. Please fill in the green highlighted cells with formulas when appropriate (some cells will just be numbers). Question 2 Below you are given information about ABC Corp. Please enter you answers as formulas when appropriate in the green highlighted cells.
National Co. has the opportunity to increase its annual sales by P125,000 by selling to a new, riskier group of customers. The uncollectible expense is expected to be 10%, and collection costs will be 10%. The company’s manufacturing and selling expenses are 70% of sales, and its effective tax rate is 40%. If National Co. were to accept this opportunity, the company’s after tax profits would increase by
The company is planning to provide services to a client and receives $90,000 in year 2020. The client has the option to pay the money in the current year or over the next 3 years. Accordingly, Pioneer has the option of reporting the profit in the current year or over the next 3 years. Assume that Pioneer’s uses 9% discount rate and its marginal tax rate is 35% in year 2020 and 40% in the next three years. Which option should the company select? And why
Genesis Corporation want to purchase a piece of machinery for $150,000 that will cost $20,000 to have it delivered and installed. Based on past information, they believe they can sell the machinery for $25,000 in 5 years. The company’s marginal tax rate is 34%. If the applicable CCA rate is 20% and the required return on this project is 15%, what is the present value of the CCA tax shield?
Suppose you sell a fixed asset for $312,000 when its book value is $102,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?

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