Homework Answers
| Initial investment | $2,000,000 | Tax rate | 40% | |||||||||
| Depreciation year | 20 | Annual receipts | $650,000 | |||||||||
| Dpereciation per year | $100,000 | Annual payout | $225,000 | |||||||||
| cash flow | ||||||||||||
| Years | ||||||||||||
| items | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | ||
| Receipts | 0 | $650,000 | $650,000 | $650,000 | $650,000 | $650,000 | $650,000 | $650,000 | $650,000 | $650,000 | ||
| payout | 0 | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 | ||
| Income per year | 0 | $425,000 | $425,000 | $425,000 | $425,000 | $425,000 | $425,000 | $425,000 | $425,000 | $425,000 | ||
| Initial investemnt | $2,000,000 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | ||
| Depreciation | 0 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | $100,000 | ||
| Taxable income | 0 | $325,000 | $325,000 | $325,000 | $325,000 | $325,000 | $325,000 | $325,000 | $325,000 | $325,000 | ||
| Tax | 0 | $130,000 | $130,000 | $130,000 | $130,000 | $130,000 | $130,000 | $130,000 | $130,000 | $130,000 | ||
| Net cash flow | -$2,000,000 | $295,000 | $295,000 | $295,000 | $295,000 | $295,000 | $295,000 | $295,000 | $295,000 | $295,000 | ||
| IRR | 6.07% | |||||||||||
prospective rate of return = 6.07%
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I just need part C.
The effective combined tax rate in a firm is 40% An...
Which one of the following is the reason for the need of adjusting the tax amount...
Which one of the following is the reason for the need of adjusting the tax amount when valuing a firm using the cash flow from assets approach Multiple Choice O The tax effect of the dividend payments must be eliminated C) Only straight line depreciation can be used when computing taxes for valuation purposes O Taxes must be computed for valuation purposes based solely on the marginal tax rate < Prey 7 of 30 Next > search hapter Fourteen (Part...
3) Your company has a tax rate of 35%. You have just bought a new piece...
3) Your company has a tax rate of 35%. You have just bought a new piece of equipment which cost $150,000. If the equipment increases revenue by $50,000 per year, and will be depreciated using straight-line depreciation over a period of five years, by how much will the company's annual income taxes increase (or decrease) due to the new equipment?
C) Alpha Inc. has the following: Pretax financial income for 2018 of $100,000 Tax rate is %40 War...
please type your response and
please answer all parts and show work
c) Alpha Inc. has the following: Pretax financial income for 2018 of $100,000 Tax rate is %40 Warranty expense for financial purposes is $5,000, and warranty deductions per the tax return is $2,000 Gross profit on construction contracts using the percentage of completion method for books is $92,000. Gross profit on construction contracts for tax purposes is $62,000. Depreciation for financial reporting purposes is $60,000 and it is...
I really just need the journal entries and how income tax payable and expense are calculated...
I really just need the journal entries and
how income tax payable and expense are calculated for the entries
each year. Thank you
Ayres Services acquired an asset for $116 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020,...
I just need help on the last two I got wrong Depreciation and Rate of Return...
I just need help on the last two I got wrong
Depreciation and Rate of Return Burrell Company purchased a machine for $58,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $29,000 each year. The tax rate is 20%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of...
P4. Temporary Differences, Deferred Tax Assets and Liabilities, Realizability of Deferred Assets, Change in Tax Rate....
P4. Temporary Differences, Deferred Tax Assets and Liabilities, Realizability of Deferred Assets, Change in Tax Rate. The following information is available for the first 4 years of operations for Shooting Star Corporation: Taxable Income (incorporates all information presented) Enacted Tax Rate (%) Year $200,000 2018 40% 2019 132,000 40 110,000 2020 40 2021 120,000 40 On January 2, 2018, the firm acquired heavy equipment costing $200,000 in a cash transaction. The equip- ment had a useful life of 5 years...
A firm with an effective income tax rate of 42 percent is interested in purchasing a...
A firm with an effective income tax rate of 42 percent is interested in purchasing a new machine for $45,000. In order to pay for this asset, the firm acquired a $20,000 debt at 10 percent interest. The interest and the principal are to be paid in equal annual amounts over a 5 year period. The remaining $25,000 is from the firm’s equity capital. The minimum attractive rate of return is 10 percent (after tax). The useful life of this...
1.Assume a tax rate of 35%. You are considering a new machine that will increase gross...
1.Assume a tax rate of 35%. You are considering a new machine that will increase gross income by $120,000/year for 5 years. The machine costs $250K, and will be straight-line depreciated over 5 years (so $50K/y depreciation charge). What are the after tax cash flows (increase to income, and depreciation tax break) for Y1-Y5? (Answer: +78K, +17.5K, total of 95.5K) 2.What’s the NPV of the cash flows, at an 8% discount rate? 3.Assume a tax rate of 20% and re-do...
Your firm is considering investing in a small stand-alone plant. It will be located on a...
Your firm is considering investing in a small stand-alone plant. It will be located on a site that the firm currently owns. The firm paid $2,000,000 for this site seven years ago. They recently spent $100,000 to upgrade the site, in preparation for the project under consideration. Recently, they had an offer from the county government to buy the location for $925,000. The building and equipment needed for the operation will cost $2,400,000. These assets will be depreciated over six...
The following information was disclosed during the audit of Crane Inc. Amount Due per Tax Return...
The following information was disclosed during the audit of Crane Inc. Amount Due per Tax Return Year 1. 2017 $134,300 2018 105,300 2. On January 1, 2017, equipment costing $583,900 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.) 3. In January 2018, $222,900 is...
Which one of the following is the reason for the need of adjusting the tax amount when valuing a firm using the cash flow from assets approach Multiple Choice O The tax effect of the dividend payments must be eliminated C) Only straight line depreciation can be used when computing taxes for valuation purposes O Taxes must be computed for valuation purposes based solely on the marginal tax rate < Prey 7 of 30 Next > search hapter Fourteen (Part...
3) Your company has a tax rate of 35%. You have just bought a new piece of equipment which cost $150,000. If the equipment increases revenue by $50,000 per year, and will be depreciated using straight-line depreciation over a period of five years, by how much will the company's annual income taxes increase (or decrease) due to the new equipment?
please type your response and
please answer all parts and show work
c) Alpha Inc. has the following: Pretax financial income for 2018 of $100,000 Tax rate is %40 Warranty expense for financial purposes is $5,000, and warranty deductions per the tax return is $2,000 Gross profit on construction contracts using the percentage of completion method for books is $92,000. Gross profit on construction contracts for tax purposes is $62,000. Depreciation for financial reporting purposes is $60,000 and it is...
I really just need the journal entries and
how income tax payable and expense are calculated for the entries
each year. Thank you
Ayres Services acquired an asset for $116 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020,...
I just need help on the last two I got wrong
Depreciation and Rate of Return Burrell Company purchased a machine for $58,000 on January 2, 2019. The machine has an estimated service life of 5 years and a zero estimated residual value. The asset earns income before depreciation and income taxes of $29,000 each year. The tax rate is 20%. Required: Compute the rate of return earned (on the average net asset value) by the company each year of...
P4. Temporary Differences, Deferred Tax Assets and Liabilities, Realizability of Deferred Assets, Change in Tax Rate. The following information is available for the first 4 years of operations for Shooting Star Corporation: Taxable Income (incorporates all information presented) Enacted Tax Rate (%) Year $200,000 2018 40% 2019 132,000 40 110,000 2020 40 2021 120,000 40 On January 2, 2018, the firm acquired heavy equipment costing $200,000 in a cash transaction. The equip- ment had a useful life of 5 years...
The following information was disclosed during the audit of Crane Inc. Amount Due per Tax Return Year 1. 2017 $134,300 2018 105,300 2. On January 1, 2017, equipment costing $583,900 is purchased. For financial reporting purposes, the company uses straight-line depreciation over a 5-year life. For tax purposes, the company uses the elective straight-line method over a 5-year life. (Hint: For tax purposes, the half-year convention as discussed in Appendix 11A must be used.) 3. In January 2018, $222,900 is...
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