Nittany Manufacturing Corp. plans to buy a machine toolset that would cost $50,000. If purchased, the toolset
Question:
Nittany Manufacturing Corp. plans to buy a machine toolset that would cost $50,000. If purchased, the toolset will be financed by a $10,000 bank loan repayable in two equal annual installments, where the loan has an 8% rate compounded annually. The tool is expected to generate annual revenue of $40,000 for two years and is to be depreciated by the MACRS three-year recovery period. The tool will require annual O&M costs in the amount of $10,000. The salvage value at the end of the two years is expected to be $5,000. Ordinary gains and losses are taxed at a 21% tax rate, and capital gains are taxed at 40%. Use this information to answer the following questions. (this question is based on 10-19 from the Park textbook)
1) What is the annual payment for the bank loan? Round to the nearest integer.
2) Fill in the blanks. Note that the entire table is blank and, while we do not ask for each blank to be filled, there are additional values missing besides the ones we ask for. Round all answers to the nearest integer.
| Year | 0 | 1 | 2 |
| Income Statement | |||
| Revenues | |||
| Expenses | |||
| Operations & Maintenance | |||
| Depreciation | C = | ||
| Interest | D = | ||
| Taxable Income | F = | ||
| Income Taxes | G = | ||
| Net Income | H = | ||
| Cash Flow Statement | |||
| Operating Activities | |||
| Net Income | I = | ||
| Depreciation | J = | ||
| Investment Activities | |||
| investment | A = | ||
| salvage | $5,000 | ||
| gains tax | K = | ||
| Financial Activities | |||
| borrowed funds | $10,000 | ||
| principal repayment | E = | ||
| Net Cashflow | B= | L = |
Expert Answer:
cost of machine 5000000 Bank loan 1000000 Int on loan 8 Revenue 4000000 operating cost 1000000 salva... View the full answer
