Taxes are Costs, and, Therefore, Changes in Tax Rates

Taxes are Costs, and, Therefore, Changes in Tax Rates for $1 Only (Instant Download)

Taxes are costs, and, therefore, changes in tax rates can affect consumer prices, project lives, and the value of existing firms. Evaluate the change in taxation on the valuation of the following project:

0123
1.Initial investment100
2.revenues100100100
3.cash operating costs505050
4.tax depreciation33.3333.3333.33
5.income pretax16.6716.6716.67
6.tax at 40%6.676.676.67
7.net income101010
8. after -tax salvage15
9. cash flow (7+8+4-1)-10043.3343.3358.33
NPV at 20%=0

Assumptions: Tax depreciation is straight-line over three years. Pre-tax salvage value is 25 in year 3 and 50 if the asset is scrapped in year 2. Tax on salvage value is 40% of the difference between salvage value and book value of the investment. The cost of capital is 20%.

  1. Please verify that the information given above yields NPV = 0.
  2. If you decide to terminate the project in year two (2) what would be the NPV of the project?
  3. Suppose that the government now changes tax depreciation to allow a 100% write-off in year one (1). How does this affect your answers to parts a and b above?
  4. Would it now make sense to terminate the project after two rather than three years?

Please show the detailed process.

Price of Answer: Just US$1 only (Instant Download)

Buy Now
The safe, easier way to pay

Need Assistance…??  email us at [email protected].

If you need any type of help regarding Homework, Assignments, Projects, Case study, Essay writing or anything else then just email us at [email protected]solvemyquestion.com.  We will get back to you ASAP. Do not forget to maintain the time frame you need your work to be done.

Master’s of Accountancy Degree at Central University Costs

Master’s of Accountancy Degree at Central University Costs in $8 only (Instant Download)

A Master’s of Accountancy degree at Central University costs $12,000 for an additional fifth year of education beyond the bachelor’s degree. Assume that all tuition is paid at the beginning of the year. A student considering this investment must evaluate the present value of cash flows from possessing a graduate degree versus holding only the undergraduate degree. Assume that the average student with an undergraduate degree is expected to earn an annual salary of $50,000 per year (assumed to be paid at the end of the year) for 10 years after graduation. Assume that the average student with a graduate Master’s of Accountancy degree is expected to earn an annual salary of $66,00 per year (assumed paid at the end of the year) for nine (9) years after graduation. Assume a minimum required rate of return of 10%:

  1. Determine the net present value of cash flows from an undergraduate degree.
  2. Determine the net present value of cash flows from a Master’s of Accountancy degree, assuming no salary is to be earned during the graduate year of schooling.
  3. What is the net advantage or disadvantage of pursuing a graduate degree under these circumstances?

The answer should be in 3 pages and supported by articles journal references.

Sample Answer:

….The best method to evaluate a Capital Budgeting proposal is the NPV method or discounted Cash Flow method. The word “net” in this term indicates that the entire cash flows-positive or negative are considered. This method takes into account the concept of time value of money…..

Year02 to 10
-$12,000.00
Annual Salary$66,000.00
….
Net Cash Flow
* Present value annuity factor @10%15…..
Present…..-$12,000.00$…….
NPV (sum of all present value of cash flows)$333,576.00

Price of Answer: Just US$8 only (Instant Download)Buy Now

Need Assistance…??  email us at [email protected].

If you need any type of help regarding Homework, Assignments, Projects,  Case study, Essay writing or any thing else then just email us at [email protected]solvemyquestion.com.  We will get back to you ASAP. Do not forget to maintain the time frame you need you work to be done.