Answer:
Explanation:
$540,100
$424,080
Cannot be determined from the given information.The internal rate of return is the rate of return at which the net present value of the project is zero.
Net present value = −Investment required + (Net annual cash inflow × Present value factor of an annuity for 7 years at 12%)$0 = -Investment required + ($70,000 × 4.564)
Investment required = $70,000 × 4.564 = $319,480
Welch Corporation is considering a capital budgeting project that would require investing $360,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $730,000 and annual incremental cash operating expenses would be $517,000. The project would also require a one-time renovation cost of $145,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 12%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.The income tax expense in year 2 is:$6,900$27,900$36,900$57,900Depreciation expense = (Original cost - Salvage value) ÷ Useful life= ($360,000 - $0) ÷ 4 years = $90,000 per yearYear 2Calculate the annual tax expense:Sales$730,000 Cash operating expenses$ (517,000)Depreciation expense$(90,000)Incremental net income$123,000 Tax rate 30%Income tax expense$(36,900)Zangari Corporation has provided the following information concerning a capital budgeting project:
After-tax discount rate15 %Tax rate35 %Expected life of the project4 yearsInvestment required in equipment$160,000
Salvage value of equipment$0 Annual sales$696,000
Annual cash operating expenses$532,000
One-time renovation expense in year 3$32,500
The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.The income tax expense in year 3 is:
$49,525$32,025$74,025$39,025D
epreciation expense = (Original cost − Salvage value) ÷ Useful life= ($160,000 − $0) ÷ 4 years = $40000 per yearYear 3Calculate the annual tax expense:Sales$ 696,000 Cash operating expenses$(532,000)One-time expense$ (32,500)Depreciation expense$ (40,000)Incremental net income$91,500 Tax rate35%Income tax expense$ (32,025)Dekle Corporation has provided the following information concerning a capital budgeting project:Click here to view Exhibit 8B-1and Exhibit 8B-2to determine the appropriate discount factor(s) using tables.
