Analyze the priblem showing yearly depreciation , taxable income , taxes and aft
ID: 2481509 • Letter: A
Question
Analyze the priblem showing yearly depreciation , taxable income , taxes and after tax cash flow as well as the future value for tge system at t=10 years4. Farmington Enterprises wishes to estimate the After Tax Futu following investment. It will use SNL (straight line) depreciation t depreciation. Interest rat on Enterprises wishes to estimate the After Tax Future worth of the nt line) depreciation to estimate its estimate its new machinery to be conside emachinery to be considered is 1,000,000. Salvage Value after 10 years h 100,000. Cash flow i Initial cost of e will be 1-6%, income tax rate will be 40%. Initial cost of s increased revenue 600,000 but with increased operating and 10 years is maintenance expenses of 200,000 for each year (uniformly). Analyz showing yearly depreciation, Taxable Income, Taxes and After Tax Cash as the future value for the system at t= 10 years. of 200,000 for each year (uniformly). Analyze the problem xes and After Tax Cash Fiow as wel Flow as well
Explanation / Answer
Year Increased revenue Maintenance expenses Cash flow Less : Depreciation (1,000,000-100,000)/10 Taxable income Taxes @ 40% After tax cash flows Add: Depreciation Net Cash inflow Year 1 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 1 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 2 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 3 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 4 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 5 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 6 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 7 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 8 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 9 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Year 10 6,00,000 200000 4,00,000 90000 3,10,000 1,24,000 1,86,000 90000 2,76,000 Total 66,00,000 22,00,000 44,00,000 9,90,000 34,10,000 13,64,000 20,46,000 9,90,000 30,36,000
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