Degemes Corporation is considering investing $33,000 in a new machine . The machine is expected to last five years and to have a residual value of \$8.000 Annual tax net cash inflow from the machine is expected to be $ 7,000 . Degernes Corporation's income tax rate is 40% Calculate the accounting rate of return (Round your answer to the nearest tenth of a percent ) (Note : The accounting rate of return is called the unadjusted rate of return in your textbook ) 9.8% 20.5% 5.9 % None of the listed choices are correct 9.6%

Degemes Corporation is considering investing $33,000 in a new machine . The machine is expected to last five years and to have a residual value of \$8.000 Annual tax net cash inflow from the machine is expected to be $ 7,000 . Degernes Corporation's income tax rate is 40% Calculate the accounting rate of return (Round your answer to the nearest tenth of a percent ) (Note : The accounting rate of return is called the unadjusted rate of return in your textbook ) 9.8% 20.5% 5.9 % None of the listed choices are correct 9.6%

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P: The Rodriguez Company is considering an average-risk investment in a mineral water spring project...

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The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of 170,000. The project will produce 1,000 cases of mineral water per year indefinitely, starting at Year 1. The Year-1 sales price will be 138 per case, and the Year-1 cost per case will be 105. The firm is taxed at a rate of 25%. Both prices and costs are expected to rise after Year 1 at a rate of 6% per year due to inflation. The firm uses only equity, and it has a cost of capital of 15%. Assume that cash flows consist only of after-tax profits because the spring has an indefinite life and will not be depreciated. a. What is the present value of future cash flows? (Hint: The project is a growing perpetuity, so you must use the constant growth formula to find its NPV.) What is the NPV? b. Suppose that the company had forgotten to include future inflation. What would they have incorrectly calculated as the projects NPV?
Stevie’s Sporting Goods is considering investing $33,000 in a new machine. The machine is expected to last five years and have a salvage value of $8,000. Annual after-tax net cash inflow from the machine is expected to be $7,000. Calculate the accounting rate of return (aka the unadjusted rate of return). (Enter your answer as a percentage rounded to one decimal place, but do NOT include the percentage sign. For example: 5 divided by 35 is 0.142857, which you would enter as “14.3”)
Degernes Corporation is considering investing $33,000 in a new machine . The machine is expected to last five years and to have a residual value of net cash inflow from the machine is expected to be $ 7,000 . Degemes Corporation's income tax rate is 40 % Calculate the accounting rate of return ( Round your answer to the nearest tenth of a percent ) ( Note : The accounting rate of return is called the unadjusted rate of return in your textbook ) 9.8 % 20.5 % 5.9% None of the listed choices are correct 9.6 %
Dobson Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income of $59,000. The equipment will have an initial cost of $507,000 and have an seven year life. There is no salvage value of the equipment. The hurdle rate is 14%. Ignore income taxes. a. Calculate accounting rate of return. (Round your answer to 2 decimal places.) Rate of Return b. Calculate payback period (Round your answer to one decimal place.) Years Payback Period
Concrete Corp plans on buying a new mixture at a cost of $150,000. The after tax benefit from this investment will be $23,000 each year for the next 12 years. What is the internal rate of investment? (Round to one decibmal place and do not enter the % sign in your answer)
Builtrite is considering purchasing a new machine that would cost $60,000 and the machine would be depreciated (straight line) down to $0 over its five year life. At the end of five years it is believed that the machine could be sold for $15,000. The machine would increase EBDT by $42,000 annually. Builtrite’s marginal tax rate is 34%. What is the TCF associated with the purchase of this machine? $5,100 $7,500 $0 $9,900
Kelly, Inc. management is considering purchasing a new machine at a cost of $4,133,250. They expect this equipment to produce cash flows of $814,322, $863,275, $937,250, $1,017,112, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, compute the NPV of this investment and explain how the tax imposition would affect your NPV.
ACDC Company is considering the installation of a new machine that costs $150,000. The machine is expected to lead to net income of $44,000 per year for the next 5 years. Using straight-line depreciation, $0 salvage value, and an effective income tax rate of 28%, determine the after-tax rate of return for this investment. If the company’s after-tax MARR rate is 12%, would this be a good investment or not?
Montcalm Company is evaluating the purchase of a new machine that costs $435,000, will have a CCA rate of 25%, an estimated useful life of 10 years and a $15,000 terminal disposal price. The company's marginal tax rate is 32%. It is estimated that the machine will increase before tax profits by $85,000 annually. Montcalm requires a 14% after tax rate of return. Based on the above information, calculate the tax shield. Multiple Choice о O O $80,864 $81,118 $83,752 $84,417 None of the above
Baird Bros. Construction is considering the purchase of a machine at a cost of $202,000. The machine is expected to generate cash flows of $37,000 per year for 10 years and can be sold at the end of 10 years for $27,000. Interest is at 11%. Assume the machine purchase would be paid for on the first day of year one, but that all other cash flows occur at the end of the year. Ignore income tax considerations. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required:a. What is the net present value of the cash flows?b. Determine whether Baird should purchase the machine.
Daily Enterprises is purchasing a $10.1 million machine. It will cost $55,000 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 $4.1 million per year along with incremental costs of $1.3 million per year. If Daily's marginal tax rate is 21%, what are the incremental earnings (net income) associated with the new machine? The annual incremental earnings are $ (Round to the nearest dollar.) ...
C Corp. faces a marginal tax rate of 35 percent. One project that is currently under evaluation has a cash flow in the fourth year of its life that has a present value of $10,000 (after-tax). C Corp. assumes that all cash flows occur at the end of the year and the company uses 11 percent as its discount rate. What is the pre-tax amount of the cash flow in year 4? (Round to the nearest dollar.) * A. $15,181 B. $23,356 C. $9,868 D. $43,375