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Studentka2010 [4]
3 years ago
11

A company is considering replacing an old machine, which has a market value of $75,000 and a tax basis of $50,000. The new machi

ne would cost $145,000 and would require an additional $12,000 in working capital for spare parts. If the company’s tax rate is 34%, what would be the initial cash outlay for this replacement project?
Business
1 answer:
sp2606 [1]3 years ago
8 0

Answer:

$90,500

Explanation:

The computation of initial cash outlay is shown below:-

initial cash outlay = New machine cost + Increase in working capital - After tax salvage value

= $145,000 + $12,000 - (($75,000 - ($75,000 - $50,000) × 0.34

= $145,000 + $12,000 - $66,500

= $90,500

Therefore for computing the initial cash outlay we simply applied the above formula.

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Mickey and Jenny Porter file a joint tax return, and they itemize deductions. The Porters incur $2,000 in investment expenses. T
Reil [10]

Answer:

Please check the following explanation

Explanation:

Capital losses are not included in the calculation of net investment income. Therefore, $2,000 long-term capital loss would have no effect on investment income. Thus, Porters' investment income will remain $2,500.

Consequently, Porters' can deduct $2,500 of the investment interest expense and the remaining $500 of investment interest expense will be carried over to next year.

4 0
2 years ago
Rick Co. had 30 million shares of $1 par common stock outstanding at January 1, 2021. In October 2021, Rick Co.'s Board of Direc
Bond [772]

Answer:

Debit retained earnings for $15.30 million.

Explanation:

As per the data given in the question,

Declaration of common stock dividend indicates no cash payments, only extra shares issued with rate of stock dividend

In this Rick Co. had 30 million shares and Rick Co. declared 1% stock dividend  

which means 30 million × 1% = 0.30 million shares issued

Retained earning = (0.30 million × $51)  

= $15.30 million

To common stock A/c =  (0.30 × $1) = $0.30 million

To capital paid in access A/c = (0.30 million × ($51-$1)) =  $15.00 million

( Being stock dividend was issued at 1% )

Hence, Option (d) Debit retained earning for $15.30 million is correct.

8 0
2 years ago
Ghost, Inc., has no debt outstanding and a total market value of $240,000. Earnings before interest and taxes, EBIT, are project
Elina [12.6K]

Answer:

a-1. We have:

Recession EPS = $1.49

Normal EPS = $2.13

Expansion EPS = $2.45

a-2. We have:

Recession percentage change in EPS = -30.00%

Expansion percentage change in EPS = 15.00%

b-1. We have:

Recession EPS = $1.12

Normal EPS = $1.76

Expansion EPS = $2.08

b-2. We have:

Recession percentage change in EPS = -36.36%

Expansion percentage change in EPS = 18.18%

Explanation:

Note: See the attached excel file for the calculations of the EPS and the percentage changes in EPS.

From the attached excel file, we have:

a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued.

Recession EPS = $1.49

Normal EPS = $2.13

Expansion EPS = $2.45

a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession.

Recession percentage change in EPS = -30.00%

Expansion percentage change in EPS = 15.00%

b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization.

Recession EPS = $1.12

Normal EPS = $1.76

Expansion EPS = $2.08

b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession.

Recession percentage change in EPS = -36.36%

Expansion percentage change in EPS = 18.18%

Download xlsx
3 0
3 years ago
MJ LTD is expected to grow at various rates over the next five years. The company just paid a $1.00 dividend. The company expect
Black_prince [1.1K]

Answer:

$21.859

Explanation:

According to the scenario, computation of the given data are as follow:-

Present Value = D0 × (1 + growth rate)^time ÷ (1 + Required Rate of Return)^time period

1st Year PV = $1 × (1 + 0.20)^1 ÷ (1+ 0.12)^1

                  = 1.20 ÷ 1.12

                 = 1.071

2nd Year PV = $1 × (1 + 0.20)^2 ÷ (1+ 0.12)^2

                   = $1 × (1.44) ÷ 1.254

                  = $1.148

3rd Year PV = $1 × ( 1 + 0.20)^2 × (1 + 0.10) ÷ (1 + 0.12)^3

                    = $1 × (1.44) × (1.10) ÷ 1.405

                     = $1.127

4th Year PV = $1 × ( 1 + 0.20)^2 × (1 + 0.10)^2 ÷ ( 1 +0.12)^4

                    = $1 × (1.44) × (1.21) ÷ 1.574

                     = $1.107

5th Year PV = $1 × (1 + 0.20)^2 × ( 1 +0.10)^3 ÷ (1 + 0.12)^5

                     = $1 × (1.44) × (1.331) ÷ 1.762

                     = $1.088

6th Year PV = $1 × (1 + 0.20)^2 × (1 + .10)^3 × (1.05) ÷ [(0.12 - 0.05) × (1+.12)^5]

= $1 × (1.44) × (1.331) × (1.05) ÷ (0.07) ×  (1.762)

= $2.012 ÷ 0.1233

= $16.318

Now

Share’s Current Value is

= $1.071 + $1.148 + $1.127 + $1.107 + $1.088 + $16.318

= $21.859

We simply applied the above formula

5 0
2 years ago
Laura is head of ABC Systems. She needs to allocate a fixed amount of funds to various projects. There are two top projects that
TEA [102]

Answer: A. dialectic method

Explanation:

The DIALECTIC METHOD or DIALECTICS at it's basic level is a sort of debate between people of opposing viewpoints who wish to use the debate to come up with the best viewpoint by stating the facts and truths of their viewpoints.

They speak on whatever misgivings they may have about the other and explain in a logical manner why their views are better.

It is 'sort' of like a debate because unlike debates, it isn't supposed to get emotional but be fact and merit based.

3 0
3 years ago
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