Firm X has the opportunity to invest $200,000 in a new venture. The projected cash flows from
Question:
Firm X uses an 8 percent discount rate to compute NPV, and its marginal tax rate over the life of the venture will be 35 percent. Determine if Firm X should make the investment, assuming that:
a. The revenues are taxable income, and the expenses are deductible.
b. The revenues are taxable income, but the expenses are nondeductible.
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Transcribed Image Text:
Year 0 Year 1 Year 2 Year 3 Initial investment Revenues Expenses Return of investment Before-tax net cash flow $(200,000) $40,000 $40,000 40,000 (25,000) (7,000) (7,000 $(200,000) $15,000 $33,000 $233,000
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 88% (9 reviews)
a Firm X should make the investment because the NPV is positive b Firm X should no...View the full answer
Answered By
Ashington Waweru
I am a lecturer, research writer and also a qualified financial analyst and accountant. I am qualified and articulate in many disciplines including English, Accounting, Finance, Quantitative spreadsheet analysis, Economics, and Statistics. I am an expert with sixteen years of experience in online industry-related work. I have a master's in business administration and a bachelor’s degree in education, accounting, and economics options.
I am a writer and proofreading expert with sixteen years of experience in online writing, proofreading, and text editing. I have vast knowledge and experience in writing techniques and styles such as APA, ASA, MLA, Chicago, Turabian, IEEE, and many others.
I am also an online blogger and research writer with sixteen years of writing and proofreading articles and reports. I have written many scripts and articles for blogs, and I also specialize in search engine
I have sixteen years of experience in Excel data entry, Excel data analysis, R-studio quantitative analysis, SPSS quantitative analysis, research writing, and proofreading articles and reports. I will deliver the highest quality online and offline Excel, R, SPSS, and other spreadsheet solutions within your operational deadlines. I have also compiled many original Excel quantitative and text spreadsheets which solve client’s problems in my research writing career.
I have extensive enterprise resource planning accounting, financial modeling, financial reporting, and company analysis: customer relationship management, enterprise resource planning, financial accounting projects, and corporate finance.
I am articulate in psychology, engineering, nursing, counseling, project management, accounting, finance, quantitative spreadsheet analysis, statistical and economic analysis, among many other industry fields and academic disciplines. I work to solve problems and provide accurate and credible solutions and research reports in all industries in the global economy.
I have taught and conducted masters and Ph.D. thesis research for specialists in Quantitative finance, Financial Accounting, Actuarial science, Macroeconomics, Microeconomics, Risk Management, Managerial Economics, Engineering Economics, Financial economics, Taxation and many other disciplines including water engineering, psychology, e-commerce, mechanical engineering, leadership and many others.
I have developed many courses on online websites like Teachable and Thinkific. I also developed an accounting reporting automation software project for Utafiti sacco located at ILRI Uthiru Kenya when I was working there in year 2001.
I am a mature, self-motivated worker who delivers high-quality, on-time reports which solve client’s problems accurately.
I have written many academic and professional industry research papers and tutored many clients from college to university undergraduate, master's and Ph.D. students, and corporate professionals. I anticipate your hiring me.
I know I will deliver the highest quality work you will find anywhere to award me your project work. Please note that I am looking for a long-term work relationship with you. I look forward to you delivering the best service to you.
3.00+
2+ Reviews
10+ Question Solved
Related Book For
Principles Of Taxation For Business And Investment Planning 2016 Edition
ISBN: 9781259549250
19th Edition
Authors: Sally Jones, Shelley Rhoades Catanach
Question Posted:
Students also viewed these Business Law questions
-
A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm...
-
Pronto Cleaners, a chain of dry-cleaning stores, has the opportunity to invest in one of two dry cleaning machines. Machine A has a four-year expected life and a cost of $30,000. It will cost an...
-
Digital Organics (DO) has the opportunity to invest $1 million now ( ) and expects after-tax returns of $600,000 in and $700,000 in . The project will last for two years only. The appropriate cost of...
-
Divalent carbon species called carbenes care capable of fleeting existence. For example, methylene: CH2, is the simplest carbene. The two unshared electrons in methylene can be either spin-paired in...
-
A car on a circular track accelerates from rest. (a) The car experiences (1) only angular acceleration, (2) only centripetal acceleration, (3) both angular and centripetal accelerations. Why? (b) If...
-
Write the sum in summation notation. (2 + 2) + (2 + 2) + (24 + 2) + (25+2)
-
Within the context of engineering economy, beta \((\beta)\) symbolizes which of the following? a. The corporate tax rate b. The price of a company's preferred stock c. The ratio of common stock price...
-
Sara transfers land (a capital asset) having a $30,000 adjusted basis to Temple Corporation in a Sec. 351 exchange. In return, Sara receives the following consideration: Consideration FMV 100 shares...
-
Ok, so your job is to figure out the GDP for the following scenario: For the year 2050, Transylvania's people consume 70 M worth of garlic, 10 M worth of stakes, and 40 M worth of other assorted...
-
A sequential application with a 20% part that must be executed sequentially, is required to be accelerated three-fold. How many CPUs are required for this task? How about five-fold speedup?
-
Investor W has the opportunity to invest $500,000 in a new venture. The projected cash flows from the venture are as follows. Investor W uses a 7 percent discount rate to compute NPV. Determine if...
-
Company DL must choose between two business opportunities. Opportunity 1 will generate $14,000 before-tax cash in years 0 through 3. The annual tax cost of Opportunity 1 is $2,500 in years 0 and 1...
-
Smythe Transportation began 2016 with accounts receivable, inventory, and prepaid expenses totaling $60,000. At the end of the year, Smythe had a total of $62,000 for these current assets. At the...
-
Mr. X transferred a track of land under sec 85 to Corp X. ACB of the land 100,000 and the FMV of the land is $3,000,000. In return, Mr. X received cash of 2,000,000 and common shares with a PUC and...
-
Assume the market price of a 14-year bond for Margaret Inc. is $1,075, and it has a par value of $1,000. The bond has an annual interest rate of 7% that is paid semiannually. What is the yield to...
-
Read the following algorithm: Algorithm for converting a fraction x into binary with p binary places. Inputs: fraction x EQ, 0
-
Gold Mining, Inc. is using the profitability index (PI) when evaluating projects. Gold Mining's cost of capital is 13.09%. What is the PI of a project if the initial costs are $2,472,241 and the...
-
7. Express each of these statements into logical expressions using predicates, quantifiers, and logical connectives. Let the domain consist of all people. Let S(r) be "r is in your class," P(r) be "r...
-
Find the derivatives of the function. y = xe -x + e x3
-
Complete problem P10-21 using ASPE. Data from P10-21 Original cost ................................................................. $7,000,000 Accumulated depreciation...
-
Explain why each of the following expenditures is or is not deductible: a. Lumbar, Inc., pays $12,000 as its share of its employees Social Security tax. The $12,000 is deductible. b. Leroy pays a...
-
Classify each of the following transactions as a deductible expense, a nondeductible expense, or a loss: a. Nira sells for $4,300 stock that cost $6,000. b. Chiro Medical, Inc., pays $2,200 for...
-
Based on the following information, what are the taxable income and tax liability for a single individual? Total income ........... $103,000 Excludable income ........... 2,000 Deductions for...
-
What is the relationship among Expected rate of return, Expected dividend yield and the Expected growth rate (or the capital gains yield)? Explain in a a paragraph.
-
Winston Co. has a company policy of increasing its dividend by 2.5 percent annually. What will the annual dividend be 3 years from now if the last dividend per share was $2.80 per share?
-
How can we navigate the ethical complexities of globalized supply chains, including issues of labor rights, environmental impact, and economic inequality, in the context of increasingly...
Study smarter with the SolutionInn App