4. A large corporation subjected to 21% marginal tax is investing in a new income producing...

80.2K

Verified Solution

Question

Finance

4. A large corporation subjected to 21% marginal tax isinvesting in a new income producing asset that is depreciated on aMACRS 5 year schedule. The full price of the asset is 300,000 butthe asset will be financed at an interest rate of 7.00% over 5years after a down payment of 15%. The expected revenue and costsby year are given below. When retired, the asset will have novalue. Year 1 2 3 4 5 6 Direct Revenue 120,000 280,000 360,000320,000 210,000 90,000 Direct and Allocated Cost 85,000 120,000160,000 150,000 110,000 65,000 Prepare a net after tax cash flow(ATCF) statement / exhibit for all 6 years of the new asset. a.What is the net cash flow in year 2? b. What is the net cash flowin year 5? c. What is the PW of the net cash flow applying aninterest rate of 12.0%?

Answer & Explanation Solved by verified expert

4.2 Ratings (736 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

4. A large corporation subjected to 21% marginal tax isinvesting in a new income producing asset that is depreciated on aMACRS 5 year schedule. The full price of the asset is 300,000 butthe asset will be financed at an interest rate of 7.00% over 5years after a down payment of 15%. The expected revenue and costsby year are given below. When retired, the asset will have novalue. Year 1 2 3 4 5 6 Direct Revenue 120,000 280,000 360,000320,000 210,000 90,000 Direct and Allocated Cost 85,000 120,000160,000 150,000 110,000 65,000 Prepare a net after tax cash flow(ATCF) statement / exhibit for all 6 years of the new asset. a.What is the net cash flow in year 2? b. What is the net cash flowin year 5? c. What is the PW of the net cash flow applying aninterest rate of 12.0%?