A distribution center purchased an equipment for $100,000 and has depreciated the equipment using the MACRS depreciation schedule with as a 7-year property. The operating income in year 2 was $200,000 and the expenses were $87,000. If the company is in the 40% income tax bracket, determine the after-tax cash flow in year 2 The tax in year 2 is equal to __________________.

Group of answer choices

$40,00

$35,404

$24,490

None of these

An equipment purchased at a cost $80,000 by a local company is being depreciated using MACRS method as a 5-year property. At the end of four years, the management decided to sell the equipment for a modest price of $20,000. The company is in the 34% tax bracket. Compute the tax consequence on the sale of this equipment.

Group of answer choices

$6,800

$926.40

$533.12

None of these

First cost of equipment = $150,000 Market value at the end of year 6 = $30,000 MACRS depreciation is used. The equipment is a 5-year property. Combined income-tax rate for the company = 35%

Year	0	1	2	3	4	5	6
BT-CF in $	-150K	60K	63K	66K	69K	72K	75K
O&M Expenses		10K	13K	16K	19K	22K	25K

Reference: Case Study 12

The first-year after tax-cash flow is _____________.

Group of answer choices

$33,000

$27,000

$43,000

$53,000

First cost of equipment = $150,000 Market value at the end of year 6 = $30,000 MACRS depreciation is used. The equipment is a 5-year property. Combined income-tax rate for the company = 35%

Year	0	1	2	3	4	5	6
BT-CF in $	-150K	60K	63K	66K	69K	72K	75K
O&M Expenses		10K	13K	16K	19K	22K	25K

Reference: Case Study 12

The tax on depreciation recapture in year 6 is equal to __________________.

Group of answer choices

$6,000

$3,000

$10,500

$10,000

A production equipment at a cost of $500,000 has been purchased by a contract manufacturing company. to meet the specific needs of customer that had awarded a 4-year contract with the possibility of extending the contract for another 4 years. The company plans to use the MACRS depreciation method for this equipment as a 7-year property for tax purposes. The income tax rate for the company is 39%, and it expects to have an after -tax rate of return of 12% for all its investments. The equipment generated an annual income of $100,000 for the first four years. The customer decided not to renew the contract after 4 years. Consequently, the company decided to sell the equipment for $180,000 at the end of 4 years. Determine if the company obtained the expected after-tax rate of return on this investment (Type Yes or No)

First cost of equipment = $150,000 Market value at the end of year 6 = $30,000 MACRS depreciation is used. The equipment is a 5-year property. Combined income-tax rate for the company = 35%

Year	0	1	2	3	4	5	6
BT-CF in $	-150K	60K	63K	66K	69K	72K	75K
O&M Expenses		10K	13K	16K	19K	22K	25K

Reference: Case Study 12

The fourth -year taxable income is equal to ________________.

Group of answer choices

$500

$32,750

$50,000

$51,720

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Lets go through each of these scenarios one by one 1 Tax in Year 2 Given Operating Income in Year 2 200000 Expenses in Year 2 87000 Income ... View the full answer