Listed belows is a set of financial data associated with a project. Compute the

Question

Listed belows is a set of financial data associated with a project. Compute the after tax cash flow, taxable income, income tax and after-tax income for this enterprise for the year 2014.

$100,000

Purchase new (depreciable) equipment
(Note: purchase on January1, 2014, MACRS 3 years)

$100,000

Depreciation expense on equipment purchased prior to January 1 $50,000 Operating expenses $50,000 Revenue $1,200,000 Cost of goods sold $500,000 Payment on Loan: $500,000 @6%, 5 years, initiated 1/1/2012.
Note that this loan is for a commercial building purchased for $500,000 on 1/1/2012 Sale of asset for $30,000 with a book value of $40,000 Marginal tax rate 35%

Explanation / Answer

Total depreciation = 33.33%*100,000 + 50000= $83330

interest expense = 6%*500000= $30,000

After tax cash flow = 342335.5+ 83330=$425665.50

Revenue 1200000 Cost of goods sold 500000 Depreciation 83330 Operating Expenses 50000 Interest expense 30000 Loss on sale of asset 10000 Pre tax income 526670 Income tax 184334.5 After tax income 342335.5

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