Need assistance with the steps on the below problems on how to solve. Manning Co
ID: 2456341 • Letter: N
Question
Need assistance with the steps on the below problems on how to solve.
Manning Corporation is considering a new project requiring a $88,500 investment in test equipment with no salvage value. The project would produce $66,000 of pretax income before depreciation at the end of each of the next six years. The company’s income tax rate is 38%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1, FV of $1, PVA of $1, and FVA of $1)
Straight-Line Depreciation MACRS Depreciation
Year 1 $ 8,850 $ 17,700
Year 2 17,700 28,320
Year 3 17,700 16,992
Year 4 17,700 10,195
Year 5 17,700 10,195
Year 6 8,850 5,098
Totals $ 88,500 $ 88,500
1.Complete the following table assuming use of straight-line depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes.
Income Before Depreciation
Straight-Line Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
2. Complete the following table assuming use of MACRS depreciation. Net cash flow equals the income amount before depreciation minus the income taxes.
Income Before Depreciation
MACRS Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
3. Compute the net present value of the investment if straight-line depreciation is used. Use 10% as the discount rate.
Chart values are based on:
I =
Year
Net cash inflow
x
Table factor
=
Present Value
1
?
x
?
=
2
?
x
?
=
3
?
x
?
=
4
?
x
?
=
5
?
x
?
=
6
?
x
?
=
?
?
?
Net present value
?
4. Compute the net present value of the investment if MACRS depreciation is used. Use 10% as the discount rate.
Chart values are based on:
I =
Year
Net cash inflow
x
Table factor
=
Present Value
1
?
x
?
=
2
?
x
?
=
3
?
x
?
=
4
?
x
?
=
5
?
x
?
=
6
?
x
?
=
?
?
?
Net present value
?
Income Before Depreciation
Straight-Line Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Explanation / Answer
1.Complete the following table assuming use of straight-line depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes.
Income Before Depreciation
Straight-Line Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
$66,000
$8,850
$57,150
$21,717
$44,283
Year 2
$66,000
$17,700
$48,300
$18,354
$47,646
Year 3
$66,000
$17,700
$48,300
$18,354
$47,646
Year 4
$66,000
$17,700
$48,300
$18,354
$47,646
Year 5
$66,000
$17,700
$48,300
$18,354
$47,646
Year 6
$66,000
$8,850
$57,150
$21,717
$44,283
2. Complete the following table assuming use of MACRS depreciation. Net cash flow equals the income amount before depreciation minus the income taxes.
Income Before Depreciation
MACRS Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
$66,000
$17,700
$48,300
$18,354
$47,646
Year 2
$66,000
$28,320
$37,680
$14,318
$51,682
Year 3
$66,000
$16,992
$49,008
$18,623
$47,377
Year 4
$66,000
$10,195
$55,805
$21,206
$44,794
Year 5
$66,000
$10,195
$55,805
$21,206
$44,794
Year 6
$66,000
$5,098
$60,902
$23,143
$42,857
3. Compute the net present value of the investment if straight-line depreciation is used. Use 10% as the discount rate.
Chart values are based on:
I =
Year
Net cash inflow
x
Table factor
=
Present Value
1
$44,283
x
0.9091
=
$40,258
2
$47,646
x
0.8264
=
$39,375
3
$47,646
x
0.7513
=
$35,796
4
$47,646
x
0.683
=
$32,542
5
$47,646
x
0.6209
=
$29,583
6
$44,283
x
0.5645
=
$24,998
Sum of PVs
$202,552
Minus Initial Investment
($88,500)
Net present value
$114,052
4. Compute the net present value of the investment if MACRS depreciation is used. Use 10% as the discount rate.
Chart values are based on:
I =
Year
Net cash inflow
x
Table factor
=
Present Value
1
$47,646
x
0.9091
=
$43,315
2
$51,682
x
0.8264
=
$42,710
3
$47,377
x
0.7513
=
$35,594
4
$44,794
x
0.683
=
$30,594
5
$44,794
x
0.6209
=
$27,813
6
$42,857
x
0.5645
=
$24,193
Sum of PVs
$204,219
Minus Initial Investment
($88,500)
Net present value
$115,719
1.Complete the following table assuming use of straight-line depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes.
Income Before Depreciation
Straight-Line Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
$66,000
$8,850
$57,150
$21,717
$44,283
Year 2
$66,000
$17,700
$48,300
$18,354
$47,646
Year 3
$66,000
$17,700
$48,300
$18,354
$47,646
Year 4
$66,000
$17,700
$48,300
$18,354
$47,646
Year 5
$66,000
$17,700
$48,300
$18,354
$47,646
Year 6
$66,000
$8,850
$57,150
$21,717
$44,283
2. Complete the following table assuming use of MACRS depreciation. Net cash flow equals the income amount before depreciation minus the income taxes.
Income Before Depreciation
MACRS Depreciation
Taxable Income
Income Taxes
Net Cash Flows
Year 1
$66,000
$17,700
$48,300
$18,354
$47,646
Year 2
$66,000
$28,320
$37,680
$14,318
$51,682
Year 3
$66,000
$16,992
$49,008
$18,623
$47,377
Year 4
$66,000
$10,195
$55,805
$21,206
$44,794
Year 5
$66,000
$10,195
$55,805
$21,206
$44,794
Year 6
$66,000
$5,098
$60,902
$23,143
$42,857
3. Compute the net present value of the investment if straight-line depreciation is used. Use 10% as the discount rate.
Chart values are based on:
I =
Year
Net cash inflow
x
Table factor
=
Present Value
1
$44,283
x
0.9091
=
$40,258
2
$47,646
x
0.8264
=
$39,375
3
$47,646
x
0.7513
=
$35,796
4
$47,646
x
0.683
=
$32,542
5
$47,646
x
0.6209
=
$29,583
6
$44,283
x
0.5645
=
$24,998
Sum of PVs
$202,552
Minus Initial Investment
($88,500)
Net present value
$114,052
4. Compute the net present value of the investment if MACRS depreciation is used. Use 10% as the discount rate.
Chart values are based on:
I =
Year
Net cash inflow
x
Table factor
=
Present Value
1
$47,646
x
0.9091
=
$43,315
2
$51,682
x
0.8264
=
$42,710
3
$47,377
x
0.7513
=
$35,594
4
$44,794
x
0.683
=
$30,594
5
$44,794
x
0.6209
=
$27,813
6
$42,857
x
0.5645
=
$24,193
Sum of PVs
$204,219
Minus Initial Investment
($88,500)
Net present value
$115,719
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.