Question
In: Finance
Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery...
| Rounded Depreciation Percentages by Recovery Year Using MACRS for | ||||||
| First Four Property Classes | ||||||
| Percentage by recovery year* | ||||||
| Recovery year | 3 years | 5 years | 7 years | 10 years | ||
| 1 | 33% | 20% | 14% | 10% | ||
| 2 | 45% | 32% | 25% | 18% | ||
| 3 | 15% | 19% | 18% | 14% | ||
| 4 | 7% | 12% | 12% | 12% | ||
| 5 | 12% | 9% | 9% | |||
| 6 | 5% | 9% | 8% | |||
| 7 | 9% | 7% | ||||
| 8 | 4% | 6% | ||||
| 9 | 6% | |||||
| 10 | 6% | |||||
| 11 | 4% | |||||
| Totals | 100% | 100% | 100% | 100% | ||
| A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.81 million plus $120,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period Additional sales revenue from the renewal should amount to $1.19 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 38% of the additional sales. The firm is subject to a tax rate of 40 (Note: Answer the following questions for each of the next 6 years.) | ||||||
| a. What incremental earnings before depreciation, interest, and taxes will result from the renewal? | ||||||
| b. What incremental net operating profits after taxes will result from the renewal? | ||||||
| c. What incremental operating cash inflows will result from the renewal? | ||||||
Solutions
jeff jeffy answered 7 months agoRelated Solutions
Table: Rounded Depreciation Percentage by Recovery Year Using MACRS for First Four Property Classes Percentage by...
Table: Rounded Depreciation Percentage by Recovery Year Using
MACRS for First Four Property Classes
Percentage by recovery year
Recovery year 3 years 5 years 7 years 10 years
1 33% 20% 14% 10%
2 45 32 25 18
3 15 19 18 14
4 7 12 12 12
5 12 9 9
6 5 9 8
7 9 7
8 4 6
9 6
10 6
11 4
Total 100% 100% 100% 100%
a. Determine the after-tax cash outflows of...
An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT...
An asset with a
first cost of $9000 is depreciated using 5-year MACRS recovery. The
CFBT is estimated at $10,000 for the first 4 years and $5000
thereafter as long as the asset is retained. The effective tax rate
is 40%, and money is worth 10% per year. In present worth dollars,
how much of the cash flow generated by the asset over its recovery
period is lost to taxes?
Calculate 3-year property MACRS percentages. Show all your work.c
Calculate 3-year property MACRS percentages. Show all your
work.c
What are the differences in depreciation, cost recovery, amortization, and depletion. Discuss MACRS
What are the differences in depreciation, cost recovery,
amortization, and depletion.
Discuss MACRS
MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year 5-Year 7-Year 10-Year 1 33.33% 20.00%...
MACRS Fixed Annual Expense Percentages by Recovery
Class
Year
3-Year
5-Year
7-Year
10-Year
1
33.33%
20.00%
14.29%
10.00%
2
44.45%
32.00%
24.49%
18.00%
3
14.81%
19.20%
17.49%
14.40%
4
7.41%
11.52%
12.49%
11.52%
5
11.52%
8.93%
9.22%
6
5.76%
8.93%
7.37%
7
8.93%
6.55%
8
4.45%
6.55%
9
6.55%
10
6.55%
11
3.28%
NPV. Mathews Mining Company is looking at a
project that has the following forecasted sales: first-year
sales are 7,000 units, and sales will grow...
MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year 5-Year 7-Year 10-Year 1 33.33% 20.00%...
MACRS Fixed Annual Expense Percentages by Recovery
Class
Year
3-Year
5-Year
7-Year
10-Year
1
33.33%
20.00%
14.29%
10.00%
2
44.45%
32.00%
24.49%
18.00%
3
14.81%
19.20%
17.49%
14.40%
4
7.41%
11.52%
12.49%
11.52%
5
11.52%
8.93%
9.22%
6
5.76%
8.93%
7.37%
7
8.93%
6.55%
8
4.45%
6.55%
9
6.55%
10
6.55%
11
3.28%
Project cash flow and NPV. The managers of
Classic Autos Incorporated plan to manufacture classic
Thunderbirds (1957 replicas). The necessary foundry equipment will
cost a...
Compute the component percentages for Rhodes income statement below. (Enter your answer as a percentage rounded...
Compute the component percentages for Rhodes income statement
below. (Enter your answer as a percentage rounded to 2 decimal
place (i.e. 0.1234 should be entered as 12.34). Enter all answers
as positive values.) Compute the component percentages for Rhodes
income statement below. (Enter your answer as a percentage rounded
to 2 decimal place (i.e. 0.1234 should be entered as 12.34). Enter
all answers as positive values.)
RHODES COMPANIES, INC.
Consolidated Statements of
Earnings
(in millions, except per share and
percentage...
The Internal Revenue Code (IRS) uses the Modified Cost Recovery System (MACRS) to compute depreciation for...
The Internal Revenue Code (IRS) uses the Modified Cost Recovery
System (MACRS) to compute depreciation for tax purposes.
Depreciation under MACRS is similar to that computed under the
double-declining-balance method.
Initial Post
Begin by reading the prompt
Answer the following questions:
How might the MACRS system be beneficial for tax purposes for
individuals and/or businesses?
Why would businesses utilize straight-line depreciation for
their financial statements and MACRS for their tax accounting?
Get the depreciation using the MACRS table provided in the question.
Expansion project NPV Get the depreciation using the MACRS
table provided in the question.01234Cost (650,000)Inventory (55,000)Accounts Payable 20,000Sales 300,000 300,000 300,000 300,000Operating Cost (150,000)(150,000)(150,000)(150,000)Deprecition (214,500)(292,500) (97,500) (45,500)EBT (64,500)(142,500) 52,500 104,500Tax30% (19,350) (42,750) 15,750 31,350NI (45,150) (99,750) 36,750 73,150+ Deprection 214,500 292,500 97,500 45,500After-tax salvage Value 21,000Return NWC 35,000After-tax CF (685,000) 169,350 192,750 134,250 174,650Note in Year 4 $35,000 of working
capital is recovered plus the after tax salvage value of
$21,000.Enter the cash flows into the cash
flow register and solve for the NPV using the WACC of 11%.NPV = $(162,782); IRR = -0.83%MIRR= __________3.72%_________Payback =
_____________4.00__________________
Hunter's Lodge purchased $612,000 of equipment four years ago. The equipment is seven-year MACRS property. The...
Hunter's Lodge purchased $612,000 of equipment four years ago.
The equipment is seven-year MACRS property. The firm is selling
this equipment today for $174,500. What is the aftertax cash flow
from this sale if the tax rate is 34 percent? The MACRS allowance
percentages are as follows, commencing with Year 1: 14.29, 24.49,
17.49, 12.49, 8.93, 8.92, 8.93, and 4.46 percent. WHICH answer is
correct?
$187,407.35
$180,174.19
$198,410.18
$168,825.81
$176,610.81
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