Pebble Co. recently sold a used machine for P40,000. The machine had a book value of P60,000 at the time of the sale. What is the after-tax cash flow from the sale, assuming the company's marginal tax rate is 20 percent?

Pebble Co. recently sold a used machine for P40,000. The machine had a book value of P60,000 at the time of the sale. What is the after-tax cash flow from the sale, assuming the company's marginal tax rate is 20 percent?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 9PROB

See similar textbooks

Related questions

Q: Engro Incorporation wants to evaluate an acquisition of an equipment worth $200,000. Its marginal…

Q: Valles Galactic Industries recently bought a new plant for $27,000,000. The entire plant may be…

A: After Tax ROR is calculated by Subtracting the Operating Expenses including Depreciation and the Tax…

Q: A machine costs 100,000 and is subject to a depreciation rate of 25 percent under the WDV method.…

A: In WDV is written down value method in which depreciation is more in the initial years.

Q: The used equipment can be sold today for $4.6 million, and its tax rate is 25%. What is the…

A: After Tax Salvage Value: It is computed by reducing the tax on profit on the sale of equipment from…

Q: 2. The Jones Company has just completed the third year of a five-year MACRS recovery period for a…

A: Book value is the value of an asset after depreciation is recorded on it. When an asset is sold,…

Q: Spherical Manufacturing recently spent $11 million to purchase some equipment used in the…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: Last year, Blue Lake Mines, Inc., had earnings after tax of $550,000. Included in its expenses were…

A: Given Earnings after Tax = $550,000 Depreciation = $240,000 Deferred Taxes =$110,000 Purchase of new…

Q: Northern Inc. purchases an asset for $150,000. This asset qualifies as a five−year recovery asset…

A: Solution:- Calculation of cash flow from disposal as follows under:-

Q: Suppose you sell a fixed asset for $10,000 when its book value is $2,000. If your company's marginal…

A: Sale Price = $10,000 = SP Book Value = BV = $2,000 Tax Rate = t = 21% After-Tax Cash Flow from Sale…

Q: Suppose you sell a fixed asset for $126,000 when it's book value is $157,000. If your company's…

A: The computation of after tax cash flow is as follows:Hence, the after tax cash flow is $136850.

Q: Spherical Manufacturing recently spent $11 million to purchase some equipment used in the…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Churchill Ltd. purchases an asset for $150,000. This asset qualifies as a five-year recovery asset…

A: Allocation of the cost of the asset over the useful life of that asset is term as depreciation. It…

Q: 23,300 in labour costs, and will be useful for 9 years. Suppose that for tax purposes, the lathe…

A: Net present value is the difference between present value of cash flow and initial investment.

Q: Suppose you sell a fixed asset for $110,000 when its book value is $130,000. If your company's…

A: Loss on sale = Book value - Sale value of asset =(130000-110000) =$20000

Q: The New Town store bought some display shelves 5 years ago for $60,000. They have been depreciating…

A: Calculation of NCF (net cash flow) is shown below: Hence, option B is correct. Formula table for…

Q: Suppose you sell a fixed asset for $129,000 when its book value is $149,000. If your company’s…

A: Calculation of After-tax Cash Flow:The after-tax cash flow is $137,000.Excel Spreadsheet:

Q: Harper Corporation recently sold a used machine for $50,000. The machine had a book value of $75,000…

A: The Loss or Gain on a machine is computed by comparing the purchase price to its Netbook value. A…

Q: Nozark Corp. is now in the final year of a project. The equipment originally cost $9,179, and the…

A: Book value =$736 Sale price of equipment =$2448 Tax rate =30%

Q: Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s…

A: ANSWER After tax cash flow from sale of assets: After tax cash flow (ATCF) from sale of assets…

Q: Sandhill Corporation just purchased computing equipment for $22,000. The equipment will be…

A: The term depreciation refers to the process of systematically allocating the cost of an asset over…

Q: Margaret's Bakery is considering a replacement of their baked goods display cases. The current cases…

A: After tax cashflow = Sell Price - Tax paid on capital gain + tax saved on capital loss

Q: Suppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s…

A: After-tax cash flow of this sale is the net amount received from the sale of fixed asset. Net amount…

Q: Suppose Hampton Corporation sells land for $8,000,000. Hampton paid $5,000,000 for the land several…

A: After-tax cash flow is the amount that is arrived after net of taxes paid on the receipt of any…

Q: Donata Company purchased equipment for $45,000 in December 20x1. The equipment is expected to…

A: Solution: Additional revenue per year = $12,000 Additional cash expenses = $6,000 Depreciation for…

Q: Spherical Manufacturing recently spent $11 million to purchase some equipment used in the…

A: Here asked for multi sub part question we will solve for first three sub part question as per Q/A…

Q: Pencil, Inc., has a large crane that cost P35,000 when purchased ten years ago. Depreciation taken…

A: Purchase price = P 35000 Total depreciation = P 25000 Book value at the time of sale = 35000-25000 =…

Q: The Shellout Corp. owns a piece of petroleum drilling equipment that costs $300,000 and will be…

A: The usage of IRR is done to make a profit analysis. It further helps in deciding the capital…

Q: Six years ago, ABC Company invested $45,525 in a new machinery. The investment in net working…

A: The selling price for the machine is $19,722.The book value of the machine is $12,039.The gain made…

Q: Suppose you sell a fixed asset for $112,000 when its book value is $112,000. If your company's…

A: After-tax cash flow of the sale is the cash flow after paying the tax on the gain on sale. The fixed…

Q: National Co. has the opportunity to increase its annual sales by P125,000 by selling to a new,…

A: Manufacturing and selling expense = 125,000 x 70% = 87,500 Uncollectible expense = 125,000 x 10% =…

Q: Camden Limited is company which specializes in the manufacture of large scale replacement parts for…

A: Investment R 4,00,00,000.00 Net CashFlow R 1,60,00,000.00 Salvage…

Q: Win Corporation is considering the purchase of a P100,000 machine that i expected to result in a…

A: Accounting rate of return: The accounting rate of return is the percentage of return of a particular…

Q: Daily Enterprises is purchasing a $10.1 million machine. It will cost $52,000 to transport and…

A: Calculation of incremental cash flows of the project : a) Depreciation: Depreciation for each year…

Q: ABC, Inc., is considering purchase of a new equipment. The expected sales are expected to be…

Q: Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost…

A: Cost of equipment = $ 18,200,000 Depreciated value = 75% Book value now = Cost of…

Q: The Kings Inn Resort purchased three delivery carts 5 years ago. The delivery carts initially cost…

A: Net proceeds from sale of an asset is the proceeds as adjusted by the tax effects. In case there is…

Q: Sampaguita Company is considering the sale of a machine with a book value of P80,000 and 3 years…

A: Following is the answer to the given question

Q: Six years ago, ABC Company invested $47,736 in a new machinery. The investment in net working…

A: The selling price for the machine is $17,745.The book value of the machine is $11,017.

Q: You are a small business owner and have purchased a $10,000 asset that you can depreciate over four…

Q: Suppose you sell a fixed asset for $115,000 when it's book value is $135,000. If your company's…

A: The after tax cash flow is calculated as cash flow from sale proceeds minus tax on gain on sale

Q: Pioneer Imports has equipment that it purchased 5 years ago for $2,650,000. The equipment was used…

Q: NUBD Co. purchase a machine for P180,000, which will be depreciated on the straight-line basis over…

A: Calculation of present value of cash Inflows:::: AAnnual cash flows::P40,000 Less: Depreciation…

Q: Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost…

A: Net cost of Equipment = Cost of equipment - Depreciation = $13,500,000 - $13,500,000 x 65% =…

Q: The Shell Corporation has a 34% tax rate and owns a piece of petroleum-drilling equipment that costs…

A: Explanation : NPV is help in decision making if I have Calculate the NPV & it comes to positive…

Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: After-tax cash flows:

VIEW

Step 2: Determine after-tax cash flow from the sale:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?
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?
Cinemar Productions bought a piece of equipment for $55,898 that will last for 5 years. The equipment will generate net operating cash flows of $14,000 per year and will have no salvage value at the end of its life. What is the internal rate of return?
Precision Ltd is considering an equipment that costs $176,000, and is depreciated on a straight-line basis to zero over its 11-year useful life. The equipment is expected to be used in a 7- year project. Precision Ltd believe that at the end of the project (i.e. year 7), the company can sell the equipment for $22,000. If the tax rate is 30%, what is the net cash flow from the sale of this equipment in year 7?
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)?
A milling machine costing $18,000 will be depreciated using 7-year MACRS. The machine will be sold at the end of year 8 for $1000. The combined tax rate is 25%, and the MARR is 10%. What is the present worth of the after-tax cash flows? Submit your spreadsheet. Answer to the nearest whole dollar without the $ sign.