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Citrus2011 [14]
3 years ago
6

Stanton Inc. is considering the purchase of a new machine that will reduce manufacturing costs by $5,000 annually and increase e

arnings before depreciation and taxes by $6,000 annually. Stanton will use the Modified Accelerated Cost Recovery System (MACRS) method to depreciate the machine, and it has estimated the depreciation expense for the first year as $8,000. What is the supplemental operating cash flow for the first year?
Business
1 answer:
iris [78.8K]3 years ago
6 0

Answer:

$9,800

Explanation:

The computation of the supplemental operating cash flow for the first year is shown below:-

For computing the supplemental operating cash flow for the first year first we need to follow some steps to reach the answer which is here below:-

Total Inflows = Annual savings in cost + Increase in earning

= $5,000 + $6,000

= $11,000

Earnings before tax = Total Inflows - Depreciation

= $11,000 - $8,000

= $3,000

Tax = Earnings before tax × 40%

= $3,000 × 40%

= $1,200

Earning after tax = Earnings before tax - Tax

= $3,000 - $1,200

= $1,800

Cash flow in year 1 = Earning after tax + Depreciation

= $1,800 + $8,000

= $9,800

So, for computing the cash flow in year 1 we simply added earning after tax with depreciation.

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Marta_Voda [28]

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3 0
3 years ago
A factory costs $400,000. It will produce an inflow after operating costs of $100 000 in year 1. $ 200,000 in year 2, and $ 300,
Delvig [45]

Answer:

NPV = $62,258.56

Explanation:

initial outlay year 0 = $400,000

cash inflow year 1 = $100,000

cash inflow year 2 = $200,000

cash inflow year 3 = $300,000

discount rate = 12%

using a financial calculator, NPV = $62,258.56

if you do it by hand:

NPV = -$400,000 + $100,000/1.12 + $200,000/1.12² + $300,000/1.12³ = -$400,000 + $89,285.71 + $159,438.78 + $213,534.07 = $62,258.56

3 0
3 years ago
The Solar Calculator Company proposes to invest $5 million in a new calculator-making plant that will depreciate on a straight-l
Harrizon [31]

Answer:

The Break-even annual sales= $2,222,222.22

Explanation:

<em>The break-even sales is the amount of revenue that a business must generate that would equate its total costs to total revenue. At the break even sales, the contribution is exactly to total iced cost, and the business makes no profit or loss</em>

Contribution margin ratio = (20-5)/20=75%

Break-even (units) = Total general fixed cost /(selling price- variable cost)

                              = 5,000,000/75%

                            =  $6,666,666.67

The annual sales = $6,666,666.67/3 =   $2,222,222.22  

The Break-even annual sales= $2,222,222.22

8 0
2 years ago
Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally,
RSB [31]

Answer:

B. Joint venture

On a Joint venture, Axiom will have partner which share the risk and cost of the project.

Also this partners can be local companies with knowledge ofthe Chinese market.

Axiom will have limited liability until his contribution.

It will generate new jobs in the country and include local business persons, this will be politically acceptable

This option has everything Axiom is looking for.

Explanation:

<em>A.- if Axiom uses a subsidiary</em> it will not have access to local knowledge. Also it will be the same entity, so it won't be sharing the cost.

It won't be what the company need

<em>C.- if exporting</em> it will not be expanding inside the country. Also it will not provide local knowledge or share the cost with a third party. The goverment may create additional tariff or market cuota or any other barrier to protect national companies.

It won't be what the company need

<em>E.- Licensing: </em>will be selling the brand name or product to a third party. It will not be part of the revenue stream entirely. A third party with knowledge of the market will exploit the benefit.

<em>D. Greenfield investments: </em>The company will establishes operations on the country. It will have a high cost, but will get the goverment approval for the jobs created in China. However it will be Axiom who takes the cost and risk for the entire investment.

These two are partially suitable, but with some backwards

6 0
3 years ago
3. Andria, an attorney, has a personal injury case which is set for trial next week. She needs a good doctor to testify on behal
Fittoniya [83]

Answer

The agreement is contingent agreement and not the unenforceable.

Explanation:

Under a contingent agreement, certain actions are taken resulting from occurring or non-occurring of certain conditions. Here outcomes are dependent upon happening of events.

3 0
3 years ago
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