(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 net present value of the entire project is closest to:

A) $182,000 B) $50,724 C) $70,494 D) $147,770 A) $182,000 B) $50,724 C) $70,494 D) $147,770

Exam 30: Income Taxes and the Present Value Method

(Appendix 13C) Reye 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 9%. 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 income tax expense in year 2 is:

(Multiple Choice)

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Question 21

(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 income tax expense in year 2 is:

(Multiple Choice)

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Question 22

(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 2 is:

(Multiple Choice)

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Question 23

Under the simplifying assumptions made in the text,to calculate the amount of income tax expense associated with an investment project,first calculate the incremental net cash inflow during each year of the project and then multiply each year's incremental net cash inflow by the tax rate.

(True/False)

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Question 24

When a company invests in equipment,it is not ordinarily allowed to immediately expense the entire cost of the equipment when computing taxable income.

(True/False)

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Question 25

Dobrinski 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 project is closest to:

(Multiple Choice)

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Question 26

(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 income tax expense in year 3 is:

(Multiple Choice)

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Question 27

(Appendix 13C) Hinger Corporation is considering a capital budgeting project that would require investing $120,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $350,000 and annual incremental cash operating expenses would be $250,000. The project would also require an immediate investment in working capital of $10,000 which would be released for use elsewhere at the end of the project. The project would also require a one-time renovation cost of $40,000 in year 3. The company's income tax rate is 35% and its after-tax discount rate is 11%. 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 net present value of the entire project is closest to:

(Multiple Choice)

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Question 28

Bellows Corporation is considering a capital budgeting project that would require investing $80,000 in equipment with a 4 year useful life and zero salvage value.Data concerning that project appear below: 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 11%. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 29

(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 net present value of the entire project is closest to:

(Multiple Choice)

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Question 30

(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 3 is:

(Multiple Choice)

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Question 31

(Appendix 13C) Bedolla Corporation is considering a capital budgeting project that would require investing $160,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $430,000 and annual incremental cash operating expenses would be $310,000. The company's income tax rate is 30% and its after-tax discount rate is 8%. 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 income tax expense in year 2 is:

(Multiple Choice)

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Question 32

Halwick Corporation is considering a capital budgeting project that would have a useful life of 4 years and would involve investing $120,000 in equipment that would have zero salvage value at the end of the project.Annual incremental sales would be $360,000 and annual cash operating expenses would be $280,000.The company uses straight-line depreciation on all equipment.Its income tax rate is 35%. The income tax expense in year 2 is:

(Multiple Choice)

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Question 33

Shilt Corporation is considering a capital budgeting project that would require investing $40,000 in equipment with a 4 year useful life and zero salvage value.Data concerning that project appear below: 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 35% and the after-tax discount rate is 13%. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 34

Barbera Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 3 is:

(Multiple Choice)

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Question 35

(Appendix 13C) Boynes Corporation is considering a capital budgeting project that would require investing $200,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $490,000 and annual incremental cash operating expenses would be $330,000. The project would also require an immediate investment in working capital of $10,000 which would be released for use elsewhere at the end of the project. The project would also require a one-time renovation cost of $70,000 in year 3. The company's income tax rate is 30% and its after-tax discount rate is 14%. 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 36

(Appendix 13C) Donayre Corporation is considering a capital budgeting project that would require investing $160,000 in equipment with an expected life of 4 years and zero salvage value. Annual incremental sales would be $450,000 and annual incremental cash operating expenses would be $320,000. The project would also require a one-time renovation cost of $70,000 in year 3. The company's income tax rate is 35% and its after-tax discount rate is 7%. 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 37

Last year the sales at Summit Corporation were $400,000 and were all cash sales.The expenses at Summit were $250,000 and were all cash expenses.The tax rate was 40%.The after-tax net cash inflow at Summit last year was:

(Multiple Choice)

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Question 38

(Appendix 13C) Waltermire 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 income tax expense in year 2 is:

(Multiple Choice)

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Question 39

Vore Corporation is considering a capital budgeting project that involves investing $570,000 in equipment that would have a useful life of 3 years and zero salvage value.The net annual operating cash inflow,which is the difference between the incremental sales revenue and incremental cash operating expenses,would be $280,000 per year.The project would require a one-time renovation expense of $60,000 at the end of year 2.The company uses straight-line depreciation and the depreciation expense on the equipment would be $190,000 per year.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 rate is 30%.The after-tax discount rate is 8%. Required: Determine the net present value of the project.Show your work!

(Essay)

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Question 40

Showing 21 - 40 of 150

Under the simplifying assumptions made in the text,to calculate the amount of income tax expense associated with an investment project,first calculate the incremental net cash inflow during each year of the project and then multiply each year's incremental net cash inflow by the tax rate.

When a company invests in equipment,it is not ordinarily allowed to immediately expense the entire cost of the equipment when computing taxable income.

Barbera Corporation has provided the following information concerning a capital budgeting project: The company uses straight-line depreciation on all equipment. The total cash flow net of income taxes in year 3 is:

Last year the sales at Summit Corporation were $400,000 and were all cash sales.The expenses at Summit were $250,000 and were all cash expenses.The tax rate was 40%.The after-tax net cash inflow at Summit last year was:

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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