Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost
Posted: Thu May 19, 2022 2:23 pm
Operating cash inflows A firm is considering renewing its
equipment to meet increased demand for its product. The cost of
equipment modifications is $1.98 million plus $108,000 in
installation costs. The firm will depreciate the equipment
modifications under MACRS, using a 5-year recovery
period Additional sales revenue from the renewal should
amount to $1.26 million per year, and additional operating
expenses and other costs (excluding depreciation
and interest) will amount to 35% of the additional sales. The
firm is subject to a tax rate of 21%. (Note: Answer the following
questions for each of the next 6 years.)
a. What net incremental earnings before depreciation,
interest, and taxes will result from the renewal?
b. What net incremental operating profits after taxes will
result from the renewal?
c. What net incremental operating cash inflows will result from
the renewal?
Operating cash inflows A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.98 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table 3). Additional sales revenue from the renewal should amount to $1.26 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 35% of the additional sales. The firm is subject to a tax rate of 21%. (Note: Answer the following questions for each of the next 6 years.) a. What net incremental earnings before depreciation, interest, and taxes will result from the renewal? b. What net incremental operating profits after taxes will result from the renewal? c. What net incremental operating cash inflows will result from the renewal? a. The net incremental profits before depreciation and tax are $ . (Round to the nearest dollar.)
--- Data table 3 years 5 years 10 years نامه و TILSLLOW Troperly classes Percentage by recovery year Recovery year 7 years 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism To calculate the actual depreciation for tax purposes, be sure to apply the actual 5% Print Done
equipment to meet increased demand for its product. The cost of
equipment modifications is $1.98 million plus $108,000 in
installation costs. The firm will depreciate the equipment
modifications under MACRS, using a 5-year recovery
period Additional sales revenue from the renewal should
amount to $1.26 million per year, and additional operating
expenses and other costs (excluding depreciation
and interest) will amount to 35% of the additional sales. The
firm is subject to a tax rate of 21%. (Note: Answer the following
questions for each of the next 6 years.)
a. What net incremental earnings before depreciation,
interest, and taxes will result from the renewal?
b. What net incremental operating profits after taxes will
result from the renewal?
c. What net incremental operating cash inflows will result from
the renewal?
- Operating Cash Inflows A Firm Is Considering Renewing Its Equipment To Meet Increased Demand For Its Product The Cost 1 (204.34 KiB) Viewed 88 times
--- Data table 3 years 5 years 10 years نامه و TILSLLOW Troperly classes Percentage by recovery year Recovery year 7 years 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism To calculate the actual depreciation for tax purposes, be sure to apply the actual 5% Print Done