Question
In: Finance
Daily Enterprises is purchasing a $ 9.7 million machine. It will cost $ 48 comma 000...
Daily Enterprises is purchasing a $ 9.7 million machine. It will cost $ 48 comma 000 to transport and install the machine. The machine has a depreciable life of five years and will have no salvage value. The machine will generate incremental revenues of $ 3.9 million per year along with incremental costs of $ 1.2 million per year. If Daily's marginal tax rate is 35 %, what are the incremental earnings (net income) associated with the new machine?
The annual incremental earnings are $ ???
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Expert Solution
| Income Statement | |
| Particulars | $ |
| Incremental Revenues per year | 3,900,000 |
| Less: Incremental Costs per year | 1,200,000 |
| Earnings before Depreciation and Tax | 2,700,000 |
| Less: Depreciation per year | 1,949,600 |
| Earnings before Tax | 4,649,600 |
| Less: Tax at 35% | 1,627,360 |
| Annual Incremental Earnings | 3,022,240 |
Incremental earnings for the whole 5 years = $ 3,022,240 * 5 = $15,111,200
Excel formulas used:
jeff jeffy answered 2 years agoRelated Solutions
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