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 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 Prepare a net after tax cash flow (ATCF) statement / exhibit for all 6 years of the new asset. a. What is the net cash flow in year 2? b. What is the net cash flow in year 5? c. What is the PW of the net cash flow applying an interest rate of 12.0%?

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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...

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...

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

What would be the marginal and average tax rates for a corporation with an income level...

What would be the marginal and average tax rates for a corporation with an income level of $85,000? (Do not round intermediate calculations. Enter the marginal tax rate as a whole percent. Enter the average tax rate as a percent rounded to 2 decimal places.)

In 1986, the U.S. federal income tax system changed marginal tax rates so that the marginal...

In 1986, the U.S. federal income tax system changed marginal tax rates so that the marginal tax rate fell from 50 to 33 percent. Given the fact that employment based health insurance is tax exempted, how will this affect the demand for health insurance for employees with compensation of $6000 a month and cost of insurance being $100? Support your answer with calculations.

Is an increase in the marginal income tax rate reflected by a shift in the after-tax...

Is an increase in the marginal income tax rate reflected by a shift in the after-tax supply of labor or a movement along the supply curve when the pretax wage rate is on the vertical axis? Explain your answer. 1. A shift in the supply curve. An increase in the marginal tax rate reduces wages, so workers will need to increase the number of hours they work at every wage rate. 2. A shift in the supply curve. An increase...

Given the following data: The firm’s marginal tax rate is 21%. The current price of the...

Given the following data: The firm’s marginal tax rate is 21%. The current price of the corporation’s 10% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,011.55. The company does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $110.12. The company would incur flotation costs of $3 per share...

The firm’s marginal tax rate is 21%. • The market price of todd’s 7.5 % coupon,...

The firm’s marginal tax rate is 21%. • The market price of todd’s 7.5 % coupon, semiannual payment, noncallable bonds with 10 years remaining to maturity is $1,250 • todd does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. • The current price of the firm’s perpetual preferred stock (8%, $100 par value, quarterly dividend) is $102.10. todd would incur flotation costs of $3 per share on a new...

Assuming a 21 percent marginal tax rate, compute the after-tax cost of the following business expenses:...

Assuming a 21 percent marginal tax rate, compute the after-tax cost of the following business expenses: $6,600 premium on business property and casualty insurance. $2,200 fine paid for business entertainment. $4,700 premium on key-person life insurance. $60,000 political contribution. $8,800 client meals.

The firm’s marginal tax rate is 21%. The current price of the corporation’s 10% coupon, semiannual...

The firm’s marginal tax rate is 21%. The current price of the corporation’s 10% coupon, semiannual payment, noncallable bonds with 15 years remaining to maturity is $1,011.55. The company does not use short-term interest-bearing debt on a permanent basis. New bonds would be privately placed with no flotation cost. The current price of the firm’s 10%, $100 par value, quarterly dividend, perpetual preferred stock is $110.12. The company would incur flotation costs of $3 per share on a new issue....

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