Heritage corporation is trying to decide whether to invest in equipment to manufacture a new product. if the investment project is accepted, sales revenue will increase by $65,000 per year and materials costs will decrease by $16,000 per year. the equipment will cost $140,000 and is depreciable over 10 years using simplified straight line (zero salvage value). the firm has a marginal tax rate of 34%. calculate the firm's annual cash flows resulting from the new project.
Solved
Show answers
More tips
- C Computers and Internet IMHO: What is it, why is it important, and how to use it?...
- H Health and Medicine How to Calculate Your Ideal Weight?...
- S Style and Beauty Discover the Art of Nail Design: How Do You Paint Your Nails?...
- P Philosophy How to Develop Extrasensory Abilities?...
- O Other Everything You Need to Know About Kudyabliks...
- C Computers and Internet The Twitter Phenomenon: What it is and How to Use it...
- C Computers and Internet How to Choose a Laptop: Expert Guide and Tips...
- C Computers and Internet How to Choose a Monitor?...
- H Horoscopes, Magic, Divination Where Did Tarot Cards Come From?...
- S Style and Beauty How to Make Your Lips Fuller? Ideas and Tips for Beautiful Lips...
Answers on questions: Business
- B Business Jones Industries received $600,000 from issuing shares of its common stock and $400,000 from issuing bonds. During the year, Jones Industries also paid dividends of...
- B Business During the most recent month, the following activity was recorded: a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. b. All of the...
- B Business A fifteen-year adjustable-rate mortgage of $117,134.80 is being repaid with monthly payments of $988.45 based upon a nominal interest rate of 6% convertible monthly....
- B Business On January 1, 2021, Vaughn Manufacturing granted Sam Wine, an employee, an option to buy 1,000 shares of Vaughn Co. stock for $30 per share, the option exercisable...
- B Business I just look sooooooooooooooooooooooooooo ugly right?...
- B Business In the absence of any legal barriers on immigration from Neolandia to the United States, the economic conditions in the two countries generate an immigrant flow that...
- B Business (5) Melissa Doors, CEO of Macrohard, wanted to announce the use of cost-plus pricing in a press conference, so she asked her assistant to calculate what the % markup...
- B Business Annapolis Company reported net income of $365,000 for the current year. Depreciation recorded on buildings and equipment amounted to $73,000 for the year. Balances...
- B Business Alma, an architect, made a written contract with Buford to design a building for which Alma was to be paid 10% of the cost of construction. After the completion of...
- B Business Assume Delph uses departmental predetermined overhead rates based on machine-hours. a. Compute the departmental predetermined overhead rates. b. Compute the total manufacturing...
Ответ:
The firm's annual cash flows resulting from the new project is $58,220
Explanation:
The computation of the firm's annual cash flows is shown below:
1. Add : Sales revenue increased = $65,000 per year
2. Add: Material cost decreased = $16,000 per year
3. Profit before tax = Sales revenue + material cost
= $65,000 + $16,000
= $81,000
5. Less Tax @ 34% = Profit before tax × tax rate = $81,000 × 34% = $27,540
6. Net income = Profit before tax - tax rate = $81,000 - $27,540 = $53460
7. Add : depreciation rate = Depreciation × marginal rate
= $14,000 × 34% = $4,760
8. Annual cash flow = Net income + depreciation rate
= $53,460 + $4,760 = $58,220
where, depreciation is = (Purchase price - salvage value) ÷ Useful life
= ($140,000 - 0) ÷ 10
=$14,000
The depreciation is a non cash expense, so it is not affect the annual cash flow. That's why we don't considered depreciation in computation part.
Hence, the firm's annual cash flows resulting from the new project is $58,220
Ответ:
$90,000
Explanation:
The Trading securities are considered as cash equivalent item and recorded as current assets in the balance sheet, because of its short maturity period. The market value of securities should be reported on the balance sheet as on the year end. So, $90,000 is the appropriate answer for this question.