1.Jabba-Dabba-Doo Inc. renovated its warehouses exactly two years ago at a cost of $3.5 million. The renovations...
Question:
1.Jabba-Dabba-Doo Inc. renovated its warehouses exactly two years ago at a cost of $3.5 million. The renovations were considered leasehold improvements, so the cost was subject to straight-line depreciation for tax purposes. The firm will not need to renovate the warehouses for another three years (from today). Given that the firm’s marginal tax rate is 35% and required return is 12%, what is the present value of the remaining depreciation tax shields on the leasehold improvement? Ignore the half-year rule, and round your answer to the nearest dollar.
2.A project’s after-tax operating cash flow is $200,000 per year, with operating costs of $100,000 and depreciation of $20,000 per year. The firm’s marginal tax rate is 40%. What are the annual sales revenues from this project (rounded to the nearest dollar)?
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren