A large corporation subjected to 21% tax rate is investing in a new income producing asset...

A large corporation subjected to 21% tax rate is investing in a new income producing asset that is depreciated on a MACRS 5 year schedule. The full price of the asset is 300,000 but the asset will be financed at an interest rate of 7.00% over 4 years after a down payment of 25%. The expected revenue and costs by year are given below. When retired, the asset will have no value. Prepare a net cash flow statement / exhibit for all 6 years of the new asset. What is the net (after tax) cash flow in year 2? What is the net (after tax) cash flow in year 5? What is the PW of the net cash flow applying an interest rate of 12.0%?

Year	1	2	3	4	5	6
Direct Revenue	120,000	280,000	360,000	320,000	210,000	90,000
Direct and Allocated Cost	85,000	120,000	160,000	150,000	110,000	65,000

Expert Solution

ekkarill92 answered 1 year ago

4. A large corporation subjected to 21% marginal tax is investing in a new income producing...

4. A large corporation subjected to 21% marginal tax is investing in a new income producing asset that is depreciated on a MACRS 5 year schedule. The full price of the asset is 300,000 but the asset will be financed at an interest rate of 7.00% over 5 years after a down payment of 15%. The expected revenue and costs by year are given below. When retired, the asset will have no value. Year 1 2 3 4 5 6...

4. A large corporation subjected to 21% marginal tax is investing 200,000 in a new income...

4. A large corporation subjected to 21% marginal tax is investing 200,000 in a new income producing asset that is depreciated on a MACRS 5 year schedule. The asset was paid for completely when purchased in the first quarter of the first year of operation but for analysis purposes the cash flow of purchase is in period 0. The expected revenue and costs by year are given below. When retired, the asset will have no value. Year 1 2 3...

Gretchen's new business has a positive net income and a marginal tax rate of 21 percent....

Gretchen's new business has a positive net income and a marginal tax rate of 21 percent. Given this, an increase in which one of the following will cause the operating cash flow to increase? Depreciation Taxes Net working capital Fixed assets Cost of goods sold

15) ABC Inc. has a net income of $1,000. The tax rate is 21% and the...

15) ABC Inc. has a net income of $1,000. The tax rate is 21% and the firm made an interest payment of $250 during the year. The depreciation for the year was $200. During the year, the net fixed assets increased by $500. Cash increased by $50, inventories decreased by $75, receivables increased by $100, payables declined by $125, and the short term debt for the company increased by 150. The firm saw its common stock and paid in surplus...

The new tax law changes corporate tax rate to a lower 21%, it also changes some...

The new tax law changes corporate tax rate to a lower 21%, it also changes some thresholds of the “pass-through” entities. For example, business owners may deduct 20% of their QBI (qualified business income). Explain why partnerships and S corporations are considered “pass-through” entities and present an example of how the pass-through works.

Tax Drill - Deferred Tax Asset Ion Corporation has income tax expense/payable for book purposes of...

Tax Drill - Deferred Tax Asset Ion Corporation has income tax expense/payable for book purposes of $200,000 and $250,000 for tax purposes. Assume that Ion will only be able to use $30,000 of any deferred tax asset with the balance expiring. As a result, Ion will record a deferred tax asset of $ 50 (incorrect) and a valuation allowance of $ 20 (incorrect) . ???

Marlo, a publicly held corporation with a 21 percent tax rate, has agreed to pay an...

Marlo, a publicly held corporation with a 21 percent tax rate, has agreed to pay an annual salary of $1.32 million to its employee, Mrs. Ryman. In making your calculation, ignore the employer payroll tax. Compute Marlo’s after-tax cost of the salary when Mrs. Ryman is Marlo's principal executive officer (PEO). Compute Marlo’s after-tax cost of the salary when Mrs. Ryman is Marlo's Director of Marketing and the sixth most highly compensated employee in the company.

Thomas Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 21% ....

Thomas Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 21% . The company expects to use the equipment for 4 years, with no expected salvage value. The purchase price is $2 million and MACRS depreciation, 3-year class, will apply. If the company enters into a 4-year lease, the lease payment is $460,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an...

A certain asset was purchased at a cost of $2,700,000. This company is in the 21% tax...

A certain asset was purchased at a cost of $2,700,000. This company is in the 21% tax bracket. Complete the lines below: Year MACRS % Amount of Deprec Amount of Deprec Difference Tax Effect under MACRS under straight line 1 .3333 ______________ ________________ 2 .4444 ______________ ________________ _____________ _________ 3 .1482 ______________ ________________ 4 .0741 ______________

Effective Income Tax rate vs. Statutory Income Tax rate

Question