Question

A new project has an initial cost of $480,000 with an expected life of 8 years....

A new project has an initial cost of $480,000 with an expected life of 8 years. The project is expected to have earnings before depreciation and taxes of $125,000 per year. If the projected is being depreciated over a 3-year term and the firm's tax rate is 40%, calculate the cashflows of the project over its estimated life.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Years   1 2 3 4 5 6 7 8
Earnings before depreciation and taxes 125000 125000 125000 125000 125000 125000 125000 125000
(-) Depreciation [ 480000/3 ] 160000 160000 160000 0 0 0 0 0
Earnings before tax -35000 -35000 -35000 125000 125000 125000 125000 125000
(-) Tax @ 40% -14000 -14000 -14000 50000 50000 50000 50000 50000
Earnings after tax -21000 -21000 -21000 75000 75000 75000 75000 75000
(+) Depreciation 160000 160000 160000 0 0 0 0 0
Cashflows 139000 139000 139000 75000 75000 75000 75000 75000
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A new project costs $28 million and has an expected life of 12 years. It will...
A new project costs $28 million and has an expected life of 12 years. It will be depreciated straight line over an 7 year term. EBDT per year for the project is $5.5 million and the firm's tax rate is 40%. Show the expected cashflows per year for this project over its life.
A project has an initial cost of $1,000,000 and is expected to last for 2 years....
A project has an initial cost of $1,000,000 and is expected to last for 2 years. In year 1, depreciation charge will be $100,000 and earnings are expected to be $164,747. In year 2, depreciation will be $100,000 and earnings are expected to be $208,905. Assume the required return is 8%. What is the value of this project? Please use a formula to answer this question.
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new...
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $30,000 to $52,000 per year. The new machine will cost $87,500, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is...
Initial Cost: $70M. Life of turbines and related equipment: 10 years. Land is leased and is...
Initial Cost: $70M. Life of turbines and related equipment: 10 years. Land is leased and is included in the income numbers below. Income before taxes and depreciation $12M per year for the first 5 years Income before taxes and depreciation $10M per year for the next 5 years. A $5 million-dollar turbine overhaul is required at the end of year 5. This cost is depreciated over the remaining 5 years. Windfarm’s have a cost of capital of 10% due to...
A new project has an initial cost of $170,000. The equipment will be depreciated on a...
A new project has an initial cost of $170,000. The equipment will be depreciated on a straight-line basis to a zero book value over the five-year life of the project. The projected net income each year is $12,450, $16,400, $18,320, $14,350, and $10,300, respectively. What is the average accounting return?
Pasha Entertainment is evaluating a new project that will have a life of 5 years. This...
Pasha Entertainment is evaluating a new project that will have a life of 5 years. This project is estimated to generate sales of $250,000 each year. The annual costs are estimated to be $165,000. At Time 0, Pasha will need to invest $475,000 in new fixed assets. This will be depreciated on a straight-line method over the life of the project with no salvage value. Management has indicated that the sales and costs for this project are accurate within a...
A project has an initial cost of $1,000,000 and is expected to last for 2 years....
A project has an initial cost of $1,000,000 and is expected to last for 2 years. In year 1, depreciation charge will be $100,000 and earnings are expected to be $179,295. In year 2, depreciation will be $100,000 and earnings are expected to be $238,407. Assume the required return is 12%. What is the value of this project? (Please ignore the $ sign when submitting your answer as the system will not read it).
We are evaluating a project that costs $800,000, has a life of 8 years, and has...
We are evaluating a project that costs $800,000, has a life of 8 years, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 60,000 units per year. Price per unit is $40, variable cost per unit is $20, and fixed costs are $800,000 per year. The tax rate is 21 percent and we require a return of 11 percent on this project. Suppose the projections given for...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with...
REPLACEMENT ANALYSIS St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $52,000 per year. The new machine will cost $82,500, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period, so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax...
A new project has an initial cost of $184,000. The equipment will be depreciated on a...
A new project has an initial cost of $184,000. The equipment will be depreciated on a straight-line basis to a book value of $73,000 at the end of the four-year life of the project. The projected net income each year is $15,700, $18,300, $23,800, and $15,600, respectively. What is the average accounting return?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT