Consider the case of Alexander Industries: Alexander Industries is considering a project that requires an investment...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider the case of Alexander Industries: Alexander Industries is considering a project that requires an investment in new equipment of $3,570,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t = 0 so the equipment will be fully depreciated at the time of purchase. Alexander estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals). The company's tax rate is 25%. The after-tax cost of Alexander's new equipment is Alexander's initial net investment outlay is Suppose Alexander's new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital (NOWC) investment. Remember, that under the new tax law, this equipment was fully depreciated at t = 0. If the firm's tax rate is 25%, what is the project's total termination cash flow? Consider the case of Alexander Industries: Alexander Industries is considering a project that requires an investment in new equipment of $3,570,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t = 0 so the equipment will be fully depreciated at the time of purchase. Alexander estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals). The company's tax rate is 25%. The after-tax cost of Alexander's new equipment is Alexander's initial net investment outlay is Suppose Alexander's new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working capital (NOWC) investment. Remember, that under the new tax law, this equipment was fully depreciated at t = 0. If the firm's tax rate is 25%, what is the project's total termination cash flow?
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
Incremental costs - Initial and terminal cash flow Newcastle Coal Company is considering a project that requires an investment in new equipment of $3,400,000, with an additional $170,000 in shipping...
-
Ques 1: What is the major complaint by firms concerning the Sarbanes-Oxley act of 2012? A. the legislative maximum allowable compensation for a CEO. B. the legal requirement to disclose project...
-
What favors the formation of continuous (dense) cleavage?
-
Sorensen Company provides the following information related to its investing and financing activities for the current year: Cash receipts: Sale of common stock . . . . . . . . . . . . . . . . . . . ....
-
Would you suggest that Fredenburgmake any changes or additions to the executive summary? If so, what do you suggest?
-
In 2015, the city of San Francisco enacted an ordinance that required health warnings on advertisements for certain sugar-sweetened beverages (SSBs) that read: WARNING: Drinking beverages with added...
-
The transactions completed by PS Music during June 2014 were described at the end of Chapter 1. The following transactions were completed during July, the second month of the business's operations:...
-
A polar exploration team based near the south pole is faced with an emergency in which a very important housing and supplies module must be lifted by a special 1 crane, swung across a deep glacial...
-
Dinsmore Artists International is in the business of managing singers and other artists in the entertainment industry. It is considering the purchase of an executive jet plane to transport its...
-
Assume that a string is declared as char str[ ] = "hello"; What is the return value of sizeof(str)?
-
How has the advertising industry changed and what place does multiplatform advertising have in this new environment? Outline at least three purposes and four principles of advertising. What is...
-
How does the redemption rate for mobile coupons compare with paper coupons?
-
How does the temporary aspect of these pieces challenge your opinion about art? How do the man-made elements compliment or contradict the natural terrain in which they are installed?
-
In this discussion, you are asked to justify the importance of knowledge management systems as an integral part of any organization's information system.Answer the following questions: What is...
-
A Married couple with children is considering divorce. They are negotiating about two elements of the divorce: the level of child support that will be paid to the partner who keeps the children, and...
-
Give an example of transitory income. What effect does this income have on the marginal propensity to consume?
-
Suppose that the government imposes a specific of T dollars on a good sold by a monopolist. Does it matter for the amount bought and sold, and the total cost per unit to consumers, whether the tax is...
-
After Apple introduced its new iPhone, the price of standard cell phones rose. A consumer advocacy group that has long claimed that standard cell phone producers are colluding and acting exactly like...
-
A firm has an unprofitable factory. Managers decide to close the factory, but only after operating it for an additional six months to meet existing contractual obligations. They can inform workers...
-
Role of controller, role of chief financial officer. George Jimenez is the controller at Balkin Electronics, a manufacturer of devices for the computer industry. The company may promote him to chief...
-
In the following, assume that all growth and discount rates are stated in real terms. 1. Assume the Eurozone inflation-adjusted average growth in capital stock is 3.0 percent per annum into...
-
Which conclusion presented by Ryan about the top-down approach and the bottom-up approach is most likely correct? A. Conclusion 1. B. Conclusion 2. C. Conclusion 3. Use the following information to...
Study smarter with the SolutionInn App