90.2K

Verified Solution

Link Copied!

2. Incremental costs - Initial and terminal cash flow Consider the case of Marston Manufacturing Company: Marston Manufacturing Company is consldering a project that requires an investment in new equlpment of $3,780,000. Under the new tax lar, the equipment is eligible for 100% bonus deprociation at t=0 so the equipment will be fully depreciated at the time of purchase, Marston estimates that ins accounts receivabie and inventories need to increase by $720,000 to support the new project, some of which is financed by a $288,000 increase in spontaneous biabilities (accounts payable and accruals). The company's tax rate is 25%. The after-tax cost of Marsten's new equipment is Marston's initial net investment outiay is Suppose Marston's new equipment is expected ts 00 at the end of its four-year useful Me, and at the same time, the firm expects to recover all of its net operating working capital (N nt. Remember, that under the new tax law, this equigment was fully depreciated at t = 0. If the firm's tax rate is 25%, what is the project's total termination cash flow? $000,000 1450,000 5512,000 5082,000 Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,780,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t=0 so the equipment will be fully depreciated at the time of purchase. Marston estimates that its accounts recelvable and inventories need to increase by $720,000 to support the new project, some of which is financed by a $288,000 increase in spontaneous liabilikies (accounts payable and aceruals). The company's tax rate is 25%. The after-tax cost of Marston's new equipment is Marston's initial net investment outlay is Suppose Marston's new equipment is exp r $600,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working c nvestment. Remember, that under the new tax law, this equipment was fully depreciated at t = 0. If the firm's tax rate is 25%, what \& otal termination cash flow? $600,000$450,000$582,000$882,000 2. Incremental costs - Initial and terminal cash flow Consider the case of Marston Manufacturing Company: Marston Manufacturing Company is consldering a project that requires an investment in new equlpment of $3,780,000. Under the new tax lar, the equipment is eligible for 100% bonus deprociation at t=0 so the equipment will be fully depreciated at the time of purchase, Marston estimates that ins accounts receivabie and inventories need to increase by $720,000 to support the new project, some of which is financed by a $288,000 increase in spontaneous biabilities (accounts payable and accruals). The company's tax rate is 25%. The after-tax cost of Marsten's new equipment is Marston's initial net investment outiay is Suppose Marston's new equipment is expected ts 00 at the end of its four-year useful Me, and at the same time, the firm expects to recover all of its net operating working capital (N nt. Remember, that under the new tax law, this equigment was fully depreciated at t = 0. If the firm's tax rate is 25%, what is the project's total termination cash flow? $000,000 1450,000 5512,000 5082,000 Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,780,000. Under the new tax law, the equipment is eligible for 100% bonus depreciation at t=0 so the equipment will be fully depreciated at the time of purchase. Marston estimates that its accounts recelvable and inventories need to increase by $720,000 to support the new project, some of which is financed by a $288,000 increase in spontaneous liabilikies (accounts payable and aceruals). The company's tax rate is 25%. The after-tax cost of Marston's new equipment is Marston's initial net investment outlay is Suppose Marston's new equipment is exp r $600,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net operating working c nvestment. Remember, that under the new tax law, this equipment was fully depreciated at t = 0. If the firm's tax rate is 25%, what \& otal termination cash flow? $600,000$450,000$582,000$882,000

Answer & Explanation Solved by verified expert

See Answer