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aleksandrvk [35]
3 years ago
10

Your firm needs a machine which costs $260,000, and requires $47,000 in maintenance for each year of its 10 year life. After 5 y

ears, this machine will be replaced. The machine falls into the MACRS 10-year class life category. Assume a tax rate of 40% and a discount rate of 14%. What is the depreciation tax shield for this project in year 10?
Business
1 answer:
Aleks04 [339]3 years ago
3 0

Answer:

nominal tax shield in year 10: 6,812 dollars

present value of the tax shield: 1,837.49

Explanation:

the nominal tax shield in year 10:

We look into the MACRS table for 10-years property class: 6.55%

The depreciation expense for this year is 260,000 x 6.55% = 17,030

Then this produces a tax shield of 40% 6,812

The nominal tax shield at year 10 is 6,812 dollars

considering time value of money today this tax shield is worth:

\frac{6812}{(1 + 0.14)^{10} } = PV  

PV: 1,837.49

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The Outlet needs to raise $3.2 million for an expansion project. The firm wants to raise this money by selling zero coupon bonds
Pani-rosa [81]

Answer:

14,783.33 bonds

Explanation:

Given

Par value FV = $1000

n =20 * 2 =40

R= 7.80/2 = 3.90%

Price per bond:

price per bond :PV = \frac{FV/}{(1+r)^n}

     = \frac{000}{(1+0.039)^{40}}

      = \frac{1000}{4.619786467}

      = 216.46

No. of bonds to be issued = \frac{amount to raise}{ price per bond}

                                           = \frac{3,200,000}{216.46}  

                                            = 14,783.33 bonds

3 0
3 years ago
Which is not a characteristic of Lean production: 1. There are frequent, small deliveries 2. Suppliers are treated as partners t
olchik [2.2K]

Answer:

The incorrect statement is number (3): Workers are viewed like machinery, needed to get the job done, nothing more.

Explanation:

Lean production or Lean Manufacturing is a method of work organization that focuses on the continuous improvement and optimization of the production system by eliminating waste and all activities that do not add any value to the process. Its main purpose is to minimize the losses that arise in any manufacturing process and implement only those resources that are relevant.

<em>Lean production aims to boost employees' efficiency not necessarily automating their duties.</em>

3 0
3 years ago
Rob Lowe would like to invest $100,000 in Franklin Inc., which is offering common stock, preferred stock, and bonds on the open
jeka57 [31]

Answer:

1. Franklin Inc. is not under any legal obligation to pay divided to common stock holders. A company can only pay dividend when it makes profit. A company may not pay dividend even when it makes profit because payment of dividend at the discretion of board of directors. Dividends on common stocks are not fixed.

Payment of dividend to preferred stock holders is fixed because preferred stocks are fixed income securities. Dividend in this case does not depend on the financial fortune of a company. In case of cummulative preferred stocks, arrears of dividend in a given year can be carried forward to another year.

Franklin Inc is under a legal obligation to pay interest to debenture holders because the company is under bond to pay principal and interest as and when due. Bonds are also fixed income securities in which interest is fixed regardless of whether the company makes profit or not.

2. Rob Lowe is advised to invest in bonds because he is guaranteed of his principal and interest as and when due since the interest on bond and principal do not depend on the financial fortune of the company.

Explanation:

In the first case, explanations were made on the obligation of the company to pay dividend or interest.

In the second case, explanations were provided on the appropriate investment to undertake.

8 0
3 years ago
Cash Acme Company Balance Sheet As of January 5, 2021 (amounts in thousands) 13,700 Accounts Payable 3,200 Debt 5,100 Other Liab
IgorC [24]

Answer:

Acme Company

1. Acme Company

Balance Sheet

As of January 6, 2021 (amounts in thousands)

Cash                                         13,819

Accounts Receivable                3,188

Inventory                                  5,100

Property Plant & Equipment 15,445

Other Assets                             800

Total Assets                         38,352  

Liabilities and Equity:

Accounts Payable                 2,000

Bank Payable                             67

Debt                                      3,600

Other Liabilities                      900

Total Liabilities                    6,567

Equity:

Paid-In Capital                     7,285

Retained Earnings            24,500

Total Equity                        31,785

Total Liabilities & Equity  38,352

2. The final amount in Accounts Payable remains $2,000,000, but the Bank Payable increased from zero to $67,000.

Explanation:

a) Data and Calculations:

Acme Company

Balance Sheet

As of January 5, 2021 (amounts in thousands)

Cash                                        13,700

Accounts Receivable              3,200

Inventory                                  5,100

Property Plant & Equipment 15,400

Other Assets                             800

Total Assets                         38,200  

Liabilities and Equity:

Accounts Payable                 2,000

Debt                                      3,600

Other Liabilities                      900

Total Liabilities                    6,500

Equity:

Paid-In Capital                     7,200

Retained Earnings            24,500

Total Equity                        31,700

Total Liabilities & Equity  38,200

Transaction Analysis:

1. Cash $12 Accounts receivable $12

2. Equipment $45 Cash $45

3. Cash $85 Paid-in Capital $85

4. Cash $67 Bank payable $67

Cash

Beginning balance    13,700

Accounts receivable        12

2. Equipment                 (45)

3. Paid-in Capital            85

4. Bank payable             67

Ending balance        13,819

4 0
3 years ago
The New American Enterprise Mutual Fund's portfolio is valued at $60 million. The fund has liabilities of $2 million, and the in
Vanyuwa [196]

Answer:

$30.40

Explanation:

($40 million − $2 million) / 1.25 million shares = $30.40

8 0
2 years ago
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