11) Homework: Homework Assignment 13 (Chapter Score: 0 46 of 17 pts SP11-11 (sim

Question

11) Homework: Homework Assignment 13 (Chapter Score: 0 46 of 17 pts SP11-11 (similar to) 5of9(8compete) HW Score: 65 46%, 65 46 of 100pts Question Help * em Incremental operating cash inflows A fiem is considering renewing its equipment to meet increased demand for its product The cost of equipment modifications is $1 96 million plus $100,000 in instalation costs. The depreciate the equipment modfications under MACRS, using a 5-year recovery peied (see table B) Additional sales revenue from the renewal should amount to $1 other costs (exchdeig depreciation and interest) w amount to 3g% of the addional sales The fm i"bject to a tatate of 40% (Note Anwe he tak ng b. What incremental net operating prolits after taxes will resut from the renewa c. What incre 0 Data Table emental operating cash inflows will result rom the rene a. The incremental profts before depreciation and tax are 5 825500 Round to the nearest dollar recovery year b. Calculate the incremental net operating profits after taxes below Round to the nearest dolla 10 years Recovery year 18% 12% Profit before depreciation and taxes Depreciation Net proft before x Taxes Net proft after taxes 19% 12% 5% otals 100% ter any number in the edt telds and then click Check Answer retaining realism To calculate the actual depreciation for tax purposes, be sure to apply the actual umounded percentages or directly apply double dedig balance (200%) depreciation using the hall year parts remaring

Explanation / Answer

Year 1 Profit before depreciation & taxes 825500 Less:Depreciation [(1960000+100000)*20% 412000 Net profit before taxes 413500 Less:Taxes @ 40% 165400 Net profit after taxes 248100

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