What is the net incremental tax cash flow

Assignment Help Finance Basics
Reference no: EM13282819

A firm is trying to determine whether to replace an existing asset. The proposed asset has a purchase price of $50,000 and has installation costs of $3,000. The asset will be depreciated over its five year life using the straight-line method. The new asset is expected to increase sales by $17,000 and non-depreciation expenses by $2000 annually over the life of the asset. Due to the increase in sales, the firm expects an increase in working capital during the asset's life of $1,500, and the firm expects to be able to sell the asset for $6,000 at the end of its life. The existing asset was originally purchased three years ago for $25,000, has a remaing life of five years, and is being depreciated using the straight-line method. The expected salvage value at the end of the asset's life (i.e., five years from now) is $5000; however, the current sale price of the existing asset is $20,000, and its current book value if $15625. The firm's marginal tax rate is 34 percent and its required rate of return is 12%. What is the net incremental tax cash flow?

a. 13,504
b. 13,761.50
c. 14,824
d. 12,441.50

 

Reference no: EM13282819

Questions Cloud

Describe what is the activation energy for the reaction : For the gas phase decomposition of C2H5Cl, a graph of ln t versus 1 / T produced a straight line with a slope of 2.98 × 104 K. What is the activation energy for this reaction
Would you still choose the same alternative : Assuming you could earn 11 percent annually, which alternative should you choose? If you could earn 12 percent annually, would you still choose the same alternative?
How much energy does the wave carry through the window : The wave passes perpendicularly through an open window, the area of which is0.244 m2. How much energy does this wave carry through the window during a 48.9 s phone call
What is the pressure at the bottom of the water : A 70.0 cm thick layer of oil floats on a 120 cm thick layer of water. What is the pressure at the bottom of the water
What is the net incremental tax cash flow : The firm's marginal tax rate is 34 percent and its required rate of return is 12%. What is the net incremental tax cash flow?
State what is the hydronium ion concentration of acetic acid : What is the hydronium ion concentration of a 0.500 M acetic acid solution with Ka = 1.8 x 10-5. The equation for the dissociation of acetic acid is: CH3CO2H(aq) + H2O(l) H3O+(aq) + CH3CO2-(aq)
What is the specific heat capacity of the unknown metal : A 75 g piece of ice at an initially unknown temperature is placed into a glass of 350 g of water sitting at room temperature, What is the specific heat capacity of the unknown metal
Find the capacitance as a formula containing s-d-e1 and e2 : As usual neglecting edge effects, find the capacitance as a formula containing S,d, e1, ande2. Test that yourformula gives the correct well-known result for the capacitance ofa parallel-plate capacitor with uniform dielectric when you put e1 = e2.
What is the maximum number of chips : computer chips are etched on circular cylinder wafers of thickness 0.60mm that are sliced from a solid cylindrical silicon crystal of length 30cm

Reviews

Write a Review

Finance Basics Questions & Answers

  Analyze personal expenses

Examine your personal expenses on a variable and fixed basis. Determine some of your personal fixed costs and variable costs? What could cause them to change?

  Which project should be accepted

Determine the NPV for both projects using a cost of capital of 13% 2. Determine the NPV for both projects using a cost of capital of 8% 3. At an 8% discount rate, which project should be accepted? at 13% discount rate, which project should be acce..

  How do you find rate of return in annuity

For example if someone purchases for $21,000 and will receive $2,000 per year for 20 years what will their return be?

  What to the nearest cent is the value

The three months risk-free interest rate (with continuous compounding) is 5%. What to the nearest cent is the value of the short forward contract?

  Determine the risks and cost considerations

Lear, Corporation, has $800,000 in current assets, $350,000 of which are permanent current assets. In addition, the firm has $600,000 invested in fixed assets.

  What is the projected increase in retained earnings

The Cookie Shoppe expects sales of $437,500 next year. The profit margin is 5.3 percent and the firm has a 30 percent dividend payout ratio. What is the projected increase in retained earnings?

  Strategic planning and capital budgeting

You are in the role of a chief operating officer for a for-profit insurance company. A board of directors has requested that you prepare a summary of the issues involved in a potential reduction in U. S. medical insurance reimbursement of 40%...

  What is the worth of the bond

Rockne, Inc., has outstanding bonds that will mature in six years and pay an 8 percent coupon semiannually. If you paid $993.46 today and your required rate of return was 7.47 percent.

  Excess return each year should the actively managed

Find out excess return each year should the actively managed fund earn to overcome higher fees.

  How much is the bond worth today

Suppose a U.S. government bond will pay $1,000 four years from now. If the going interest rate on 4-year government bonds is 4.5%, how much is the bond worth today?

  Which is invested in short-term investments

Rihana is a financial analyst in Bidget Corp. As part of her analysis of the annual distribution policy and its impact on the firm's value, she makes the following calculations and observations.

  At what price would there be a margin call

A futures contract covers 5000 pounds with a minimum price change of $0.01 is sold for $31.60 per pound. If the initial margin is $2,525 and the maintenance margin is $1,000, at what price would there be a margin call?

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