(Appendix 13C) Stockinger Corporation has provided the following information concerning a capital budgeting project: $\begin{array}{lr} \text {Investment requiredin equipment. }&\$280,000\\ \text {Expected life of the project. }&4\\ \text { Salvage value of equipment. }&\$0\\ \text { Annual sales.}&\$580,000\\ \text {Annual cash operating expenses }&\$420,000\\ \text {Working capital requirement. }&\$30,000\\ \text {One-time renovation expense in year 3}&\$80,000\\ \end{array}$ The company's income tax rate is 35% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 3 is:

A) $76,500 B) $80,000 C) $48,500 D) $128,500 A) $76,500 B) $80,000 C) $48,500 D) $128,500

Exam 30: Income Taxes and the Present Value Method

Roemen Corporation is considering a capital budgeting project that would require investing $160,000 in equipment with a 4 year useful life and zero salvage value.Annual incremental sales would be $410,000 and annual incremental cash operating expenses would be $280,000.An investment of $20,000 in working capital would be required immediately and would be released for use elsewhere at the end of the project.The company uses straight-line depreciation on all equipment.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting.The company's tax rate is 30% and the after-tax discount rate is 12%. Required: Determine the net present value of the project.Show your work!

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(Essay)

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Question 1

Correct Answer:

Verified

Depreciation expense = (Original cost - Salvage value)÷ Useful life
= ($160,000 - $0)÷ 4 years = $40,000 per year

(Appendix 13C) Annala Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $250,000 and annual incremental cash operating expenses would be $180,000. The project would also require an immediate investment in working capital of $20,000 which would be released for use elsewhere at the end of the project. The company's income tax rate is 30% and its after-tax discount rate is 13%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

(Appendix 13C) Layer Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 8%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

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Question 3

Correct Answer:

Verified

(Appendix 13C) Mesko Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 4

(Appendix 13C) Marbry Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 5

Bonomo Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The income tax expense in year 3 is:

(Multiple Choice)

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Question 6

(Appendix 13C) Mesko Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 3 is:

(Multiple Choice)

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Question 7

(Appendix 13C) Mesko Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The income tax expense in year 2 is:

(Multiple Choice)

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Question 8

(Appendix 13C) Stockinger Corporation has provided the following information concerning a capital budgeting project: Investment requiredin equipment. \2 80,000 Expected life of the project. 4 Salvage value of equipment. \0 Annual sales. \5 80,000 Annual cash operating expenses \4 20,000 Working capital requirement. \3 0,000 One-time renovation expense in year 3 \8 0,000 The company's income tax rate is 35% and its after-tax discount rate is 11%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 3 is:

(Multiple Choice)

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Question 9

(Appendix 13C) Marbry Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The income tax expense in year 3 is:

(Multiple Choice)

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Question 10

(Appendix 13C) Layer Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 8%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 3 is:

(Multiple Choice)

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Question 11

(Appendix 13C) Layer Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 8%. The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 12

(Appendix 13C) Rollans Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 13

(Appendix 13C) Mesko Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 35% and its after-tax discount rate is 15%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 14

(Appendix 13C) Correll Corporation is considering a capital budgeting project that would require investing $240,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $570,000 and annual incremental cash operating expenses would be $420,000. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 15%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 15

Duma Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment.Assume cash flows occur at the end of the year except for the initial investments.The company takes income taxes into account in its capital budgeting. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 16

(Appendix 13C) Correll Corporation is considering a capital budgeting project that would require investing $240,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $570,000 and annual incremental cash operating expenses would be $420,000. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 15%. The company uses straight-line depreciation. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 3 is:

(Multiple Choice)

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Question 17

(Appendix 13C) Paletta Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 7%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The net present value of the entire project is closest to:

(Multiple Choice)

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Question 18

(Appendix 13C) Houze Corporation has provided the following information concerning a capital budgeting project: The working capital would be required immediately and would be released for use elsewhere at the end of the project. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 2 is:

(Multiple Choice)

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Question 19

(Appendix 13C) Paletta Corporation has provided the following information concerning a capital budgeting project: The company's income tax rate is 30% and its after-tax discount rate is 7%. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. -The total cash flow net of income taxes in year 3 is:

(Multiple Choice)

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Question 20

Showing 1 - 20 of 150

Bonomo Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The income tax expense in year 3 is:

Managerial Accounting and Cost Concepts

Job-Order Costing: Calculating Unit Production Costs

Job-Order Costing: Cost Flows and External Reporting

Process Costing

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Super-Variable Costing

Master Budgeting

Flexible Budgets and Performance Analysis

Standard Costs and Variances

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Statement of Cash Flows

Financial Statement Analysis

Cost of Quality

Activity-Based Absorption Costing

The Predetermined Overhead Rate and Capacity

Job-Order Costing: a Microsoft Excel-Based Approach

Fifo Method

Service Department Allocations

Analyzing Mixed Costs

Time-Driven Activity-Based Costing: a Microsoft Excel-Based Approach

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Standard Cost Systems: a Financial Reporting Perspective Using Microsoft Excel

Transfer Pricing

Service Department Charges

Pricing Decisions

The Concept of Present Value

the Direct Method of Determining the Net Cash Provided by Operating Activities

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