Suppose an asset has a first cost of $8,000,a life of five years, a salvage value of $2,000 atthe end of five years, and a net annual before-taxrevenue of $2,500. The firm’s marginal tax rate is35%. The asset will be depreciated by three-yearMACRS.(a) Using the generalized cash flow approach, determine the cash flow after taxes.(b) Rework part (a), assuming that the entire investment would be financed by a bank loan at aninterest rate of 9%.(c) Given a choice between the financing methodsof parts (a) and (b), show calculations to justifyyour choice of which is the better one at an interest rate of 9%.

Q: TransITRI is a transportation company with a recent need of a new construction equipment at a first…

A: The calculation of different cashflows for different years is shown in below table:

Q: Tucker Manufacturing is considering investing in specialized equipment costing $844,000. The…

A: The following are the estimated net cash inflows from the investment :   Year 1 $311,000…

Q: Baird Bros. Construction is considering the purchase of a machine at a cost of $202,000. The machine…

A: Answer a) Calculation of Net Present Value of Cash Flows Net Present Value = Present value of cash…

Q: Beyer Company's is considering the purchase of an asset for $205,000. It is expected to produce the…

A: The net present value method is used to evaluate investment projects. We can evaluate the project by…

Q: National Co. is planning to purchase a piece of equipment that will reduce annual cash expenses over…

A: The profitability index is the proportion of PV of cash inflows to PV of cash outflows.

Q: Beyer Company is considering the purchase of an asset for $400,000. It is expected to produce the…

A: Capital budgeting is the managerial approach used to evaluate whether Organization’s long term…

Q: A company is planning to spend P60,000 for a machine which will be depreciated on a straight-line…

A: Introduction: The accounting rate of return (ARR), a capital budgeting metric, is used to determine…

Q: corporation want to estimate the terminal cash flow. The proposed machine will be disposed of at the…

A: Terminal cash flow is cash flow you received at end of projects after disposal of equipment.So this…

Q: Calculate a firm's free cash flow if it has net operating profit after taxes of P60,000,…

A: Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for…

Q: The Hills Company, a calendar year company, purchased a new machine for P280,000 on January 1.…

A: Solution: Annual net income from investment = Investment amount * ARR = P280,000 * 15% = P42,000

Q: Beyer Company is considering the purchase of an asset for $180,000. It is expected to produce the…

A: A.Compute the Present value of net cash flows:

Q: ton Có, is considering investing in specialized equipment costing $975,000. The equipment has a…

A: we know that,  accounting rate of return = Average annual profit / average investment   average…

Q: Beyer Company is considering the purchase of an asset for $320,000. It is expected to produce the…

A: Definition:   Payback period: Payback period is the expected time period which is required to…

Q: Beyer Company is considering the purchase of an asset for $220,000. It is expected to produce the…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: An equipment costing ₱600,000, with a residual value of ₱30,000 at its useful life of five years, is…

A: Net Present Value(NPV) is amongst one of the modern techniques of capital budgeting which considers…

Q: An asset with a first cost of $250,000 and a 5-year recovery period is subject to MACRS…

A: Given Cost - 250000 life - 5 years MACRS method of depreciation   Depreciation:   years   1 2 3…

Q: A firm decides to invest in an asset with an initial cost of Php2 million. Over the next five years,…

A: Payback period is a tool of capital budgeting used to assess the financial viability investment,…

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: The NUBD Co. acquired a new machine for P160,000 which will be depreciated on a straight-line basis…

A: Annual Depreciation (straight line method) = (Cost of the assets - Residual value) / Expected life…

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 that a company is considering a machine acquisition. The new machine will cost $60.000 and…

A: Investment cash outflow : It refers to the outgoing of cash that occurs in a company due to…

Q: a. If taxes are 25%, what is the After tax operating cash flow for the first year?

A: Given: Operating income = $200,000 Purchased for = $2,000,000 Land portion = $200,000 Building…

Q: A corporation makes an investment of $20,000 that will provide the following cash flows after the…

A: Net present value is the difference between the present value of cash inflows and present value of…

Q: Assume that a company purchased a new machine for $19,000 that has a salvage value of $3,000 at the…

A: Present value of cash inflow = Present value of annual cash inflow + Present value of residual value…

Q: This question is based on the following in formation: An investment is Machinery costing P 250,000…

A: Annual tax shield will the tax saved on depreciation of assets. Annual Depreciation =(Cost of…

Q: Calculate a firm's free cash flow if it has net operating profit after taxes of $60,000,…

A: The total cash that a company has to pay off to its liabilities and dividend to its shareholders is…

Q: An asset with a first cost of $250,000 and a 5-year recovery period is subject to MACRS…

A: Answer has been given in the next sheet.

Q: Suppose an asset has a purchase cost of $15,000, a life of five years, a salvage value of $3,000 at…

A: Cash flow: Cash flow refers to the amount of cash or cash equivalent that comes in or goes out for a…

Q: The Upfront Company has invested RM 123,000 on fully computerized equipment with an operation and…

A: Initial cost (I) = RM 123000 Annual benefit (B) = RM 40000 Annual cost (C) = RM 7800 Residual value…

Q: mpany project capitalized for $ 50,000 invested in depreciable assets will earn a uniform annual…

A: The income return on investment is defined as cash flows.The interest or dividends paid by a…

Q: The following data are from an after-tax cash flow analysis in year 1 for anew MACRS 5-year…

A: Depreciation: It refers to a gradual decrease in the fixed asset’s value because of obsolescence,…

Q: Beyer Company Is considering the purchase of an asset for $180,000. It is expected to produce the…

A: Net Present value of the Project is the measurement of acceptance of the project. If Net present…

Q: Denver Company buys a machine for $65,000 that has an expected life of 4 years and no salvage value.…

A: Answer:   9.54%

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: The following data are accumulated by Lingle Company in evaluating the purchase of $180,000 of…

A: Calculate net present value : given purchase price of equipment =  $180,000 the required rate of…

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: An asset was purchased for P66,000. The asset is expected to last for 6 years and will have a…

A: Accounting rate of return(ARR), one of the techniques of capital budgeting is defined as the…

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.