You are a small business owner and have purchased a $10,000 asset that you can depreciateover four years ($2,500/per year). Under accelerated depreciation, you would be allowed todepreciate 75% of the asset's value immediately in the first year and the remaining 25% in thesecond year. Assume that the discount rate is 10%. Further suppose that your businessusually makes $56,000 of annual profit, on which it pays a 21% tax every year. Should youclaim accelerated depreciation, or should you depreciate the asset over the 4 years at $2,500per year?

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Answered: You are a small business owner and have…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

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Barbara Thompson is considering the purchase of a piece of business rental property containing stores and offices at a cost of $350,000. Barbara estimates that annual receipts from rentals will be $55,000 and that annual disbursement. other than income taxes will be about $18,000. The property is expected to appreciate at the annual rate of 5%. Barbara expects to retain the property for 20 years once it is acquired. Then it will be depreciated on the basis of the 39-year real-property class (MACRS), assuming that the property would be placed in service on January 1.Barbara's marginal tax rate is 30%, and her MARR is 10%. What would be the minimum annual total of rental receipts that would make the investment break-even'?
Your firm buys a new equipment for Rs. 80,000. It will give your firm annual savings of Rs. 27,000, for six years, with zero salvage value. It is to be depreciated by the SL method over four years, with placement at the start of the first year. Tax rate will be 12%. However, you decide to sell it early at the end of the third year, for Rs. 23,000. Calculate the after-tax IRR for this?
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A firm takes out a $300,000 loan to purchase an asset. It makes yearly payments of $30,000 plus interest at a 5% annual rate over 10 years. The asset brings in BTCF of $100,000 each year. The asset is purchased for the loan amount and is depreciated via the straight-line method over the term of the loan. The marginal tax rate is 35%. What is profit in the last year of the loan? $25,025 $43,550 $44,525 $45,500
You are analyzing a property that popped up on CREXI. Real estate taxes and management services cost 42,362 and 31,563, respectfully. Other expenses are 15,369. If your company’s required return is 10%, what must the average annual rent be over the next five years for you to purchase the property at $400,000 and obtain that 10%? Expenses grow at 2.5% per year. A. 189,500 B. 198,400 C. 201,300 D. 192,700 E. 209,500
A small print shop is investing in new printing equipment that will cost $33,000. They estimate that they will gain of $11,000 per year in additional revenues for each of the next 6 years. At the end of 6 years, the equipment will have a salvage value of $3.,500. Assuming a tax rate of 22%, a MACRS 5-year property class, 50% bonus depreciation, and an after-tax MARR of 8%, compute the present worth of the printing equipment and determine whether or not the print shop should invest in it. Click here to access the TVM Factor Table calculator. Click here to access the MACRS-GDS Property Classes. Click here to access the MACRS-GDS percentages page. Click here to access the MACRS-GDS percentages for 27.5-year residential rental property. Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is +10. Should the print shop invest in the printing equipment?
An asset with 5-year MACRS life will be purchased for $12,000. It will produce net annual benefits of$2500 per year for 6 years, after which time it will have a net salvage value of zero and will be retired.The company’s marginal tax rate is 26%. What is the after-tax rate of return?
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A corporation expects to receive $32,000 each year for 15 years from the sale of a product. There will be an initial investment of $150,000. Manufacturing and sales expenses will be $8067 per year. Assume straight line depreciation, a 15-year useful life and no salvage value. Use a 46% income tax rate. What is the before and after-tax rate of return?
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Let us assume that an investor can obtain an 80% LTV loan for a property valued at 500,000 at a 10% interest rate to be amortized over 25 years with monthly payments. If the property generates $70,000 net operating income per year, answer the following. What would be the Before-Tax Cash Flow from the Property Sale (BTCFs) if the property were sold in Year 5 for $440,000? $63,344.93 $816,655.07 $396,382.36 $440,000.00
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