Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depre
ID: 2471015 • Letter: T
Question
Table A-1. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for r ecovery p 5-year 7-year 10-ye 15-year20-year 5.00% 33.33% 44.45 14.81 20.00% 32.00 19.20 14.29% 24.49 10.00% 18.00 4.40 3.750% 7.219 6.677 2 12.49 8.93 8.55 7.70 6.93 4 9.22 5.713 6.23 7.37 6.55 6.55 6.56 6.55 5.285 4.888 4.522 4.462 4.461 5.76 8.93 8 4.462 4.461 4.462 4.461 4.462 3.28 4.461 4.462 4.461 4.462 4.461 20 2.231 Table A-2. 3-, 5-, 7-, 10-, 15-, and 20-Year Property Mid-Quarter Convention Placed in Service in First Quarter Depreciation rate for recovery pe riod 5-year 10-ye 15-year20-year 58.33% 7.78 12.35 1.54 7-year 25.00% 15.31 6.563% 7.000 6.482 5.996 5.546 8.75% 35.00% 26.00 15.60 17.50% 16.50 13.20 10.56 8.45 2 8.21 7.39 6.65 4 10.93 8.74 8.75 5.99 6.76 6.55 6.55 6.56 6.55 4.746 4.459 4.459 4.459 8 4.459 4.460 4.459 4.460 4.459 4.460 4.459 4.460 4.459 4.460 0.74 20 0.565Explanation / Answer
It is not clear if the net working capital returned at the end.However, assumed NWC returned at the end Also assuming operating cost does not include depreciation. Details Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 MACRS details 20.00% 32.00% 19.20% 11.52% 11.52% Capital Investment (400,000) Net Working Capital (50,000) 50,000 Revenue generated 180,000 180,000 180,000 180,000 180,000 Operating Expense (35,000) (35,000) (35,000) (35,000) (35,000) Depreciation (80,000) (128,000) (76,800) (46,080) (46,080) Taxable Income 65,000 17,000 68,200 98,920 98,920 Tax @38% (24,700) (6,460) (25,916) (37,590) (37,590) Net Income after tax 40,300 10,540 42,284 61,330 61,330 Add Back depreciation 80,000 128,000 76,800 46,080 46,080 Net Cash flow (including NWC return) (450,000) 120,300 138,540 119,084 107,410 157,410 PV factor @10% 1 0.9091 0.8264 0.7513 0.6830 0.6209 PV of Cash flows (450,000) 109,364 114,496 89,470 73,363 97,739 NPV = $ 34,431.3 ROR (IRR) calculation Details Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 MACRS details 20.00% 32.00% 19.20% 11.52% 11.52% Capital Investment (400,000) Net Working Capital (50,000) 50,000 Revenue generated 180,000 180,000 180,000 180,000 180,000 Operating Expense (35,000) (35,000) (35,000) (35,000) (35,000) Depreciation (80,000) (128,000) (76,800) (46,080) (46,080) Taxable Income 65,000 17,000 68,200 98,920 98,920 Tax @38% (24,700) (6,460) (25,916) (37,590) (37,590) Net Income after tax 40,300 10,540 42,284 61,330 61,330 Add Back depreciation 80,000 128,000 76,800 46,080 46,080 Net Cash flow (including NWC return) (450,000) 120,300 138,540 119,084 107,410 157,410 PV factor @12.893% 1 0.8858 0.7846 0.6950 0.6156 0.5453 PV of Cash flows (450,000) 106,561 108,703 82,766 66,127 85,842 NPV = $ (1.3) At required return rate 12.893% , the NPV is 0. So IRR =12.893%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.