6a. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance Total Interest Principal Balance $30,000.00 $16,134.15 $1,500.00 $14,634.15 $15,365.85 15,365.85 16,134.15 32,268.29 768.29 15,365.85 0.00 2,268.29 30,000.00 termine the before-tax CF for Year 2 (only - not the total).

6a. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance Total Interest Principal Balance $30,000.00 $16,134.15 $1,500.00 $14,634.15 $15,365.85 15,365.85 16,134.15 32,268.29 768.29 15,365.85 0.00 2,268.29 30,000.00 termine the before-tax CF for Year 2 (only - not the total).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 6P

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6a. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance Total Interest Principal Balance 1 $30,000.00 $16,134.15 $1,500.00 $14,634.15 $15,365.85 15,365.85 16,134.15 768.29 15,365.85 0.00 32,268.29 2,268.29 30,000.00 Determine the after-tax CF for Year 2 (only – not the total).
6.A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance Total Principal $1,500.00 $14,634.15 $15,365.85 Interest Balance 1 $30,000.00 $16,134.15 15,365.85 16,134.15 768.29 15,365.85 0.00 32,268.29 2,268.29 30,000.00 Determine the before-tax CF for Year 2 (only - not the total).
6b. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance Total Interest $30,000.00 $16,134.15 $1,500.00 $14,634.15 Principal Balance $15,365.85 15,365.85 16,134.15 32,268.29 768.29 15,365.85 30,000.00 0.00 2,268.29 Determine the taxable income for Year 2 (only - not the total).
S.A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the tax for Year 2 (only - not a total). Edit Format Table
6c. A large profitable corporation is considering a capital investment of $50.000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY EoY Year Balance 1 $30,000.00 $16,134.15 Total Interest Balance Principal $1,500.00 $14,634.15 $15,365.85 16,134.15 32,268.29 15,365.85 768.29 15,365.85 30,000.00 0.00 2,268.29 Determine the tax for Year 2 (only - not the total).
c. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The projections are based on current economic conditions without consideration of price or cost escalations. Nevertheless, a general inflation rate of 4% is expected, and it is anticipated that all future costs and revenues will react to this inflation. Determine the tax (in actual dollars) for Year 1 (only).
Sa. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the before-tax CF for Year 2 (only – not a total).
. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the taxable income for Year 2 (only - not a total).
. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the after-tax CF for Year 2 (only - not a total).
A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance at an effective interest rate of 5%, to be repaid in two equal end-of-year payments (see loan details below). Payment BoY Balance EoY Balance $30,000.00 $16,134.15 $1,500.00 $14,634.15 $15,365.85 Year Total Interest Principal 1 15,365.85 16,134.15 768.29 15,365.85 0.00 32,268.29 2,268.29 30,000.00 Determine the tax for Year 2 (only - not the total).
Sc. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period, The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,00O annually, The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10% Determine the tax for Year 2 (only-not a total).
A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. The corporation has decided to use borrowed capital to finance a portion of the equipment purchase. It will pay $30,000 down and finance the balance, to be repaid in two equal end-of-year $16,134.15 payments. The interest payment in Year 1 is $1500. The projections are based on current economic conditions without consideration of price or cost escalations. Nevertheless, a general inflation rate of 4% is expected, and it is anticipated that all future costs and revenues will react to this inflation. Determine the after-tax CF (in actual dollars) for…