Question
In: Accounting
A company purchases an asset that costs $46,000. This asset qualifies as three-year property under MACRS....
A company purchases an asset that costs $46,000. This asset
qualifies as three-year property under MACRS. The company uses an
after-tax discount rate of 12% and faces a 31% income tax rate.
(Use Table 1, Table 2 and Exhibit 12.4.)
1. Demonstrate that the PV of the depreciation deductions, when the
income tax rate is 31%, is $11,472.
2. Given an after-tax discount rate of 12%, what tax rate would be
needed in order for the PV of the depreciation deductions to equal
$14,260? Use the Goal Seek function of Excel.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost...
The Summit Petroleum Corporation will purchase an asset that
qualifies for three-year MACRS depreciation. The cost is $180,000
and the asset will provide the following stream of earnings before
depreciation and taxes for the next four years: Use Table
12-12.
Year 1
$
96,000
Year 2
110,000
Year 3
48,000
Year 4
46,000
The firm is in a 35 percent tax bracket and has a cost of capital
of 12 percent. Use Appendix B for an approximate answer but
calculate...
The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost...
The Summit Petroleum Corporation will purchase an asset that
qualifies for three-year MACRS depreciation. The cost is $120,000
and the asset will provide the following stream of earnings before
depreciation and taxes for the next four years: Use Table 12-12.
Year 1 $ 54,000 Year 2 66,000 Year 3 38,000 Year 4 29,000 The firm
is in a 35 percent tax bracket and has a cost of capital of 12
percent. Use Appendix B for an approximate answer but calculate...
Reversing Rapids Co. purchases an asset for $103,725. This asset qualifies as a five-year recovery asset...
Reversing Rapids Co. purchases an asset for $103,725. This asset
qualifies as a five-year recovery asset under MACRS. The five-year
expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%,
19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of
30%. The asset is sold at the end of year 4 for $10,599, what is
the cash flow from disposal?
Calculate gain or loss on disposal. Gain should be entered
as a positive number. Loss should be...
Reversing Rapids Co. purchases an asset for $131,856. This asset qualifies as a five-year recovery asset...
Reversing Rapids Co. purchases an asset for $131,856. This asset
qualifies as a five-year recovery asset under MACRS. The five-year
expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%,
19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of
30%. The asset is sold at the end of four years for $14,170.
Calculate tax credit on disposal. (The answer should be entered as
positive value). Round the answer to two decimals.
Reversing Rapids Co. purchases an asset for $110,738. This asset qualifies as a five-year recovery asset...
Reversing Rapids Co. purchases an asset for $110,738. This asset
qualifies as a five-year recovery asset under MACRS. The five-year
expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%,
19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of
30%. The asset is sold at the end of four years for $12,656.
Calculate tax credit on disposal.
Round the answer to two decimals.
Genetic Insights Co. purchases an asset for $10,522. This asset qualifies as a seven-year recovery asset...
Genetic Insights Co. purchases an asset for $10,522. This asset
qualifies as a seven-year recovery asset under MACRS. The
seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5,
and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%,
respectively. Genetic Insights has a tax rate of 30%. The asset is
sold at the end of six years for $3,906
A. A fixed asset is classified as 5-year MACRS property and has an initial cost of...
A.
A fixed asset is classified as 5-year MACRS property and has an
initial cost of $41,000 What is the aftertax cash flow from the
sale of this asset if the pre-tax salvage value at the end of year
3 is $17,500 and the tax rate is 34 percent?
Year
Five-Year
Property Class
1
20.00
%
2
32.00
3
19.20
4
11.52
5
11.52
6
5.76
$15,439.38
$15,558.04
$15,564.72
$15,463.06
B.
A firm has sales for the...
An asset in the five-years MACRS property class costs $150,000 and has a zero estimated salvage...
An asset in the five-years MACRS property class costs $150,000
and has a zero estimated salvage value after six years of use. The
asset will generate annual revenues of $320,000 and will require
$80,000 in annual labor costs and $50,000 in annual material
expenses. Assume a tax rate of 21%. Compute the after-tax cash
flows over the project life and the NPW for a MARR = 12%. Is the
investment acceptable?
1-Maple Company purchases new equipment (7-year MACRS property) on January 10, 2018, at a cost of...
1-Maple Company purchases new equipment (7-year MACRS property)
on January 10, 2018, at a cost of $430,000. Maple also purchases
new machines (5-year MACRS property) on July 19, 2018 at a cost of
$290,000. Maple wants to maximize its MACRS deductions; assume no
taxable income limitations apply. What is Maple's total MACRS
deduction for 2018?
a. $119,447.
b. $560,000.
c. $617,148.
d. $720,000.
2-Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a
sole proprietorship) reports QBI...
Three years ago, ABC Company purchased some five year MACRS property for $74,000. Today it is...
Three years ago, ABC Company purchased some five year MACRS
property for $74,000. Today it is selling it for $28,500. How much
tax will the company owe on this sale if the tax rate is 21
percent?
The MACRS percentages are as follows, commencing with Year 1:
20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.
A. -$3,431.17
B. -$6,389.44
C. $0.00
D. $1,509.48
E. $2,965.50
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