What is the prospective rate of return before income taxes

Assignment Help Microeconomics

Reference no: EM132168101

Question: The effective combined tax rate in an ownermanaged corporation is 40%. An outlay of $2 million for certain new assets is under consideration. It is estimated that for the next 8 years, these assets will be responsible for annual receipts of $600,000 and annual disbursements (other than for income taxes) of $250,000. After this time, they will be used only for stand-by purposes, and no future excess of receipts over disbursements is estimated.

(a) What is the prospective rate of return before income taxes?

(b) What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 8 years?

(c) What is the prospective rate of return after taxes if it is assumed that these assets must be written off for tax purposes over the next 20 years, using straight-line depreciation?

Reference no: EM132168101

Questions Cloud

What is the probability a simple random sample : What is the probability a simple random sample (SRS) of 25 cats will kill an average of between 9 and 12 birds a year?

What aftertax rate of return would the corporation receive : A group of businessmen formed a corporation to lease for 5 years a piece of land at the intersection of two busy streets. The corporation has invested $50,000.

Given a normal distribution with a mean : a. Given a normal distribution with a mean of 25, what is the standard deviation if 18% of the values are above 29?

What type of power was used by the effective leader : What type of power was used by the effective leader? What type of power was used by the ineffective leader?

What is the prospective rate of return before income taxes : The effective combined tax rate in an ownermanaged corporation is 40%. An outlay of $2 million for certain new assets is under consideration.

What other options does the researcher have : Suppose a researcher has one nominal-scaled variable with two categories (e.g. gender) and one ordinal-scaled variable (e.g. preference ranking for car models)

Utilize critical thinking in personal and professional life : Describe the significant ways in which you can now utilize critical thinking in your personal and professional life.

What strategies can you use to gain access to this market : The major distributor is owned by a competitive producer of bottled water. What strategies can you use to gain access to this market?

What did the federal reserve set interest rate : What did the federal reserve set interest rate to at the end of 2016, fourth quarter of 2016 what interest rate did Taylor Rule suggest?

User Account

All Pages