Will give full stars to the correct answer with breakdown of equations used. Tha
ID: 2454722 • Letter: W
Question
Will give full stars to the correct answer with breakdown of equations used. Thank you
Your company has purchased equipment (for $51,000) that will reduce materials and labor costs by $14,000 each year for N years. After N years, there will be no further need for the machine, and because the machine is specially designed, it will have no MV at any time. The IRS, however, has ruled that you must depreciate the equipment on a SL basis with a tax life of six years. If the effective income tax rate is 42%, what is the minimum number of years your firm must operate the equipment to earn 12% per year after taxes on its investment? Your firm must operate the equipment for minimum years to earn 12% per year after taxes on its investment. (Round to the nearest whole number.)Explanation / Answer
Year Revenues Expenses MACRS Depn. Taxable income Tax Amt. @ 50% Net amt. Add back: Reduced C/F due to tax on depn. Net Annual Cash flow PV F @ 8% PV @ 8% 0 -358000 -358000 1 -358000 1 124000 -8000 -71600 44400 22200 22200.00 35800 58000.00 0.92593 53703.94 2 124000 -8000 -114560 1440 720 720.00 57280 58000.00 0.85734 49725.72 3 124000 -8000 -68736 47264 23632 23632.00 34368 58000.00 0.79383 46042.14 4 124000 -8000 -41241.6 74758.4 37379.2 37379.20 20620.8 58000.00 0.73503 42631.74 5 124000 -8000 -41241.6 74758.4 37379.2 37379.20 20620.8 58000.00 0.68058 39473.64 6 124000 -8000 -20620.8 95379.2 47689.6 47689.60 10310.4 58000.00 0.63017 36549.86 6 Market value 126000 0.63017 79401.42 Net Present value -10471.54
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.