Question
In: Accounting
Equipment costing $100,000 was sold in the middle of the 4th year for a MV of...
Equipment costing $100,000 was sold in the middle of the 4th year for a MV of $20,000.
Tax rate : 40%.
Annual revenues : $55,000 per year
Annual expenses : $5,000 per year.
Using only the GDS method, populate a table with the NIAT and ATCF. Show all formulas and calculations.
Using an after tax MARR of 18%, show if this project is profitable.
The equipment is depreciated using 5-yr MACRS depreciation factors.
Solutions
Expert Solution
|
year |
Revenue |
expenses |
BTCF |
depreciation |
Taxable income |
Tax (40%) |
NIAT |
ATCF |
|
0 |
-100000 |
-100000 |
||||||
|
1 |
55000 |
5000 |
50000 |
20000 (100000*20%) |
30000 |
12000 |
18000 |
38000 |
|
2 |
55000 |
5000 |
50000 |
32000 (100000*32%) |
18000 |
7200 |
10800 |
42800 |
|
3 |
55000 |
5000 |
50000 |
19200 (100000*19.20%) |
30800 |
12320 |
18480 |
37680 |
|
4 |
55000 |
5000 |
50000 |
11520 (100000*11.52%) |
38480 |
15392 |
23088 |
34608 |
|
4 |
20000 |
20000 |
Tax = taxable income *40%
NIAT = taxable income – tax
ATCF = NIAT + depreciation
|
year |
ATCF |
PV factor (18%) |
Present value of cash flows |
|
0 |
-100000 |
1 |
-100000 |
|
1 |
38000 |
0.84746 |
32203.48 |
|
2 |
42800 |
0.71818 |
30738.10 |
|
3 |
37680 |
0.60863 |
22933.18 |
|
4 |
34608 |
0.51579 |
17850.46 |
|
4 |
20000 |
0.51579 |
10315.80 |
|
Net present value |
14041.20 |
||
PV factor using present value factor of $1 @ 18% table
As the NPV of the project is positive, the project is profitable
ekkarill92 answered 2 years agoRelated Solutions
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Financial data follows. All balances are
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BRAND purchased equipment for $290,000 cash, sold equipment costing $150,000 with a book value of $100,000,...
BRAND purchased equipment for $290,000 cash, sold equipment
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normal.
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$29,000
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Accounts receivable
125,000
97,000
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Inventory
100,000
114,000
(14,000)
Equipment
740,000
600,000
140,000
Accum. depreciation
370,000
220,000
150,000
Accounts payable
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150,000
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