GEN COMBO LL MANAGERIAL ACCOUNTING; CONNECT ACCESS CARD
16th Edition
ISBN: 9781260088458
Author: Ray H Garrison
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 13.C, Problem 5P
PROBLEM 13C-5 Income Taxes and
Shimano Company has an opportunity to manufacture and sell one of two new products for a fiveyear period. The company’s tax rate is 30% and its after-tax cost of capital is 14%. The cost and revenue estimates for each product are as follows:
Product A Product B
Initial Investment in equipment…………….......................... $400,000 $550,000
Initial investment in
Annual sales …………………………………………………. $370,000 $390,000
Annual cash operating expenses…………………………….. $200,000 $170,000
Cost of repairs needed in three years………………………... $45,000 $70,000
The equipment pertaining to both products has a useful life of five years and no salvage value. The company uses the
Required:
- Calculate the annual income tax expense for each of years 1 through 5 that will arise if Product A is introduced.
- Calculate the net present value of the investment opportunity pertaining to Product A.
- Calculate the annual income tax expense for each of years 1 through 5 that will arise if Product B is intoduced.
- Calculate the net present value of the investment opportunity pertaining to Product B.
- Calculate the project profitability index for Product A and Product B. Which of the two products should the company purses? Why?
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Module 5 Question 5
(Calculating changes in net operating working capital) Tetious Dimensions is introducing a new product and has an expected change in net operating income of $750,000. Tetious Dimensions has a 30 percent marginal tax rate. This project will also produce $195,000 of depreciation per year. In addition, this project will cause the following changes in year 1:
Question content area top
Part 1
(Related
to Checkpoint
12.1)
(Calculating changes in net operating working capital) Tetious Dimensions is introducing a new product and has an expected change in net operating income of
$750,000.
Tetious Dimensions has a
30
percent marginal tax rate. This project will also produce
$195,000
of depreciation per year. In addition, this project will cause the following changes in year 1:
Without the Project
With the Project
Accounts receivable
$51,000
$88,000
Inventory
101,000
183,000
Accounts payable
66,000…
QUESTION 32
Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%:
FV of $1
FVOA
PV of $1
PVOA
2.59374
15.93742
0.38554
6.14457
Required: What is the present value of the cash outflows/Investment
$1,750,000
$963,850
$(963,850)
$(1,750,000)
Chapter 13 Solutions
GEN COMBO LL MANAGERIAL ACCOUNTING; CONNECT ACCESS CARD
Ch. 13.A - Prob. 1ECh. 13.A - Prob. 2ECh. 13.A - Prob. 3ECh. 13.A - Prob. 4ECh. 13.A - Exercises 13A-5 Basic Present Value Concepts...Ch. 13.A - Prob. 6ECh. 13.C - Prob. 1ECh. 13.C - Prob. 2ECh. 13.C - PROBLEM 13C-3 Income Taxes and Net Present Value...Ch. 13.C - Prob. 4P
Ch. 13.C - PROBLEM 13C-5 Income Taxes and Net Present Value...Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10QCh. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - What is the major criticism of the payback and...Ch. 13 -
The Excel worksheet form that appears below is to...Ch. 13 - Prob. 1F15Ch. 13 - Prob. 2F15Ch. 13 - Prob. 3F15Ch. 13 - Prob. 4F15Ch. 13 - Prob. 5F15Ch. 13 - Prob. 6F15Ch. 13 - Prob. 7F15Ch. 13 - Prob. 8F15Ch. 13 - Prob. 9F15Ch. 13 - Prob. 10F15Ch. 13 - (
595.000
)...Ch. 13 - Prob. 12F15Ch. 13 - Prob. 13F15Ch. 13 - Prob. 14F15Ch. 13 - Prob. 15F15Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 -
EXERCISE 13-15 Internal Rateof Return and Net...Ch. 13 - Prob. 16PCh. 13 - PROBLEM 13-17 Net Present Value Analysis; Internal...Ch. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 26PCh. 13 -
PROBLEM 13-27 Net Present Value Analysis...Ch. 13 - Prob. 28PCh. 13 - Prob. 29PCh. 13 - Prob. 30PCh. 13 - Prob. 31CCh. 13 - Prob. 32C
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