The tax rate is 35 What is the operating cash flow for this project D 33000 Tax

The tax rate is 35 what is the operating cash flow

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depreciation to a zero book value over the life of the project. The tax rate is 35%. What is the operating cash flow for this project? D. $33,000 Tax = .35 [$110,000 - 70,000 - ($80,000 4)] = $7,000; OCF = $110,000 - $70,000 - $7,000 = $33,000 8-7
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Chapter 08 - Making Capital Investment Decisions 50. Peter's Boats has sales of $760,000 and a profit margin of 5%. The annual depreciation expense is $80,000. What is the amount of the operating cash flow if the company has no long-term debt? C. $118,000 OCF = ($760,000 .05) + $80,000 = $118,000 51. Le Place has sales of $440,000, depreciation of $32,000, and net working capital of $56,000. The firm has a tax rate of 34% and a profit margin of 5%. The firm has no interest expense. What is the amount of the operating cash flow? C. $54,000 OCF = ($440,000 .05) + $32,000 = $54,000 OCF – TOP DOWN APPROACH 52. Ben's Border Café is considering a project which will produce sales of $16,000 and increase cash expenses by $10,000. If the project is implemented, taxes will increase from $23,000 to $24,500 and depreciation will increase from $4,000 to $5,500. What is the amount of the operating cash flow using the top-down approach? B. $4,500 OCF = $16,000 - $10,000 - ($24,500 - $23,000) = $4,500 53. Ronnie's Coffee House is considering a project that will produce sales of $7,000 and increase cash expenses by $2,500. If the project is implemented, taxes will increase by $1,400. The additional depreciation expense will be $1,000. An initial cash outlay of $3,000 is required for net working capital. What is the amount of the operating cash flow using the top- down approach? D. $3,100 OCF = $7,000 - $2,500 - $1,400 = $3,100 OCF – TAX SHIELF APPROACH 54. A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? C. $9,350 OCF = [($60,000 - $51,000) (1 -.35)] + [($40,000 4) .35] = $9,350 55. A project will increase sales by $140,000 and cash expenses by $95,000. The project will cost $200,000 and be depreciated using the straight-line method to a zero book value over the 5-year life of the project. The company has a marginal tax rate of 34%. What is the yearly value of the depreciation tax shield? B. $13,600 Depreciation tax shield = ($200,000 5) .34 = $13,600 8-8
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Chapter 08 - Making Capital Investment Decisions MACRS 56. Sun Lee's Furniture just purchased some fixed assets classified as 5-year property for MACRS. The assets cost $24,000. What is the amount of the depreciation expense for the second year? E. $7,680 Depreciation for year 2 = $24,000 .3200 = $7,680 57. You just purchased some equipment that is classified as 5-year property for MACRS. The equipment cost $67,600. What will the book value of this equipment be at the end of three years should you decide to resell the equipment at that point in time? A. $19,468.80 Book value at the end of year 3 = $67,600 - [$67,600 (.20 + .32 + .192)] = 58. LiCheng's Enterprises just purchased some fixed assets that are classified as 3-year property for MACRS. The assets cost $2,900. What is the amount of the depreciation expense for year 4?
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