Generate tax shields from depreciation

Assignment Help Accounting Basics
Reference no: EM131026953

Pilot Plus Pens is deciding when to replace its old machine. The old machine's current salvage value is $2 million. Its current book value is $1 million. If not sold, the old machine will require maintenance costs of $400,000 at the end of the year for the next five years. Depreciation on the old machine is $200,000 per year. At the end of five years, the old machine will have a salvage value of $200,000 and a book value of $0. A replacement machine costs $3 million now and requires maintenance costs of $500,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $500,000. It will be fully depreciated by the straight-line method. In 5 years, a replacement machine will cost $3,500,000. Pilot will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 34 percent and the appropriate discount rate is 12 percent. The company is assumed to earn sufficient revenues to generate tax shields from depreciation. Should Pilot Plus Pens replace the old machine now or at the end of five years?

Reference no: EM131026953

Questions Cloud

Estimate the number of decimal digits of the keys : Write a reflection report in 100 words about the role of cryptography in securing communication of confidential documents - Encrypt a file and output the cipher text in ASCII format.
Prepare a contribution format income statement : Prepare an income statement for the month using absorption costing.
Analysis of systems translational and rotational velocities : Design a dampener such that the amplitude reduces to 10% of the initial after 2 oscillation with the same initial frequency -
How much did he budget for all bills : Jeff Bagwell of the Houston Astros has 104 hits in305 times at bat. Matt Williams of a Arizona team has 88 hits in 275 times at bat. Do they have the same batting average
Generate tax shields from depreciation : The company is assumed to earn sufficient revenues to generate tax shields from depreciation. Should Pilot Plus Pens replace the old machine now or at the end of five years?
What kind of rational function would be best to model : o polynomials are useful to ¿model¿ any kind of function on a closed interval. However, polynomials ¿get wild¿ at infinity, so they don¿t work well to try to extrapolate an arbitrary function past the closed interval in which it is being approxima..
Design and implement a class for dealing with polynomials : For example, the polynomial -2x4 + 5x2 - 3 can be input as - 2x^4 + 5x^2 - 3 with spaces around each + or - sign. You can assume that polynomials are always entered one per line.
Draw 3 time sequence diagrams : Stop and Wait ARQ, SENDER sends four frames (F1, F2, F3, and F4). F1, F2 and F4 are received error free, but F3 is lost in the network during its initial transmission. Continue the diagram until all frames are received are error free and properly ..
Direct relationship with the financial performance : The Motor Carrier safety status measurement system and the Motor Carriers annual report both show data that demonstrates a direct relationship with the financial performance

Reviews

Write a Review

 

Accounting Basics Questions & Answers

  Give the journal entry made on sears

Sears collected $57000 from the issuance of bonds with a face value of $50000. A portion of the cash receivable, $2000 was accrued interest. give the journal entry made on sears book to account the issuance of the bonds.

  Financial information for ktm corporation

Financial information for KTM Corporation (www.KTM.com) follows:

  Production records show that 25000 units were in beginning

a. determine teh equivalent units of porduction and teh unit production costs for the assembly department.b. determine

  Explain what is meant by the test data approach

Explain what is meant by the test data approach. What are the major difficulties with using this approach? Define parallel simulation with audit software and provide an example of how it can be used to test a client's payroll system.

  Darnley companys break-even point is 12200 units each unit

darnley companys break-even point is 12200 units. each unit generates variable costs of 2.20 and is sold for 4.90. what

  A welding company specializing in underwater projects has

1 a bottled gas company has 500000 common shares authorized 400000 common shares issued and 15000 common shares in

  Contrast gaap and income tax accounting

Compare and contrast GAAP and income tax accounting. Describe how they are similar and why there are differences.

  How technologies have changed the way of accounting

Discuss how these technologies have changed the way accounting is performed in your organization or in an organization of your choice

  Compute cc expected cash receipts from customers

Compute CC's expected cash receipts from customers

  Compute the revenue to be recognized in fiscal year

Compute the revenue to be recognized in fiscal year 2008 for the two operating divisions of Simona Amanar Industries in accordance with generally accepted accounting principles.

  While reconciling snyder companys bank statement an

while reconciling snyder companys bank statement an accountant discovered that the bank had collected one of the

  How can regulatory body such as fasb make good decisions

Why can't optimal regulation be determined? If optimal accounting regulation cannot be determined, how can a regulatory body such as the SEC or FASB make good decisions?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd