A large, profitable corporation with net income exceed $20 million is considering the...
Question:
A large, profitable corporation with net income exceed $20 million is considering the installation of a new machine that cost $100,000 with the expected salvage value of $20,000 after 4 years of useful life.
a) Determine the depreciation "dt" and the book vale "BV" for the first two years of depreciation methods in the table. Assume 3-yr property class for MACRS depreciation.
| Year | MACRS | SL | SOYD | 150% DB | ||||
|---|---|---|---|---|---|---|---|---|
| dt | BV | dt | BV | dt | BV | dt | BV | |
| 0 | $100,000 | $100,000 | $100,000 | $100,000 | ||||
| 1 | ||||||||
| 2 | ||||||||
b) The company expects the net income of $38,000 per year from this new machine and plan to dispose it for the salvage value at the end of year 4. If the straight line depreciation is elected by the company, complete the table below and determine the after cash flow for this investment.
| YR | Before-Tax Cash Flow (BTCF) | SL Depreciation (dt) | Taxable Income (IT) | Income Tax | After Tax Cash Flow (ATCF) |
|---|---|---|---|---|---|
| 0 | |||||
| 1 | |||||
| 2 | |||||
| 3 | |||||
| 4 |
Long-term Investment:
Long-term investments are those that would not be sold for more than one year. Long term investments are considered assets on a balance sheet and are generally held for long periods of time or never sold at all.
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View this answera) Determine the depreciation "dt" and the book vale "BV" for the first two years of depreciation methods in the table. Assume...
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Chapter 2 / Lesson 6Read the investment definition. Understand what an investor is and explore an example of an investment. Learn about government investment and understand the concept of investment.