Manning Corporation is considering a new project requiring a $92,000 investment
ID: 2487587 • Letter: M
Question
Manning Corporation is considering a new project requiring a $92,000 investment in test equipment with no salvage value. The project would produce $74,500 of pretax income before depreciation at the end of each of the next six years. The company’s income tax rate is 30%. 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) (Use appropriate factor(s) from the tables provided.)
Complete the following table assuming use of straight-line depreciation. Net cash flow equals the amount of income before depreciation minus the income taxes.
Complete the following table assuming use of MACRS depreciation. Net cash flow equals the income amount before depreciation minus the income taxes.
Compute the net present value of the investment if straight-line depreciation is used. Use 8% as the discount rate.
Compute the net present value of the investment if MACRS depreciation is used. Use 8% as the discount rate.
Manning Corporation is considering a new project requiring a $92,000 investment in test equipment with no salvage value. The project would produce $74,500 of pretax income before depreciation at the end of each of the next six years. The company’s income tax rate is 30%. 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) (Use appropriate factor(s) from the tables provided.)
Straight-LineDepreciation MACRS
Depreciation Year 1 $ 9,200 $ 18,400 Year 2 18,400 29,440 Year 3 18,400 17,664 Year 4 18,400 10,598 Year 5 18,400 10,598 Year 6 9,200 5,300 Totals $ 92,000 $ 92,000 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.
Explanation / Answer
Answer:1
Answer:2
Answer:3
Answer:4
Year Income before Dep Straight line Dep Taxable income Income taxes Net cash Flows 1 74500 9200 65300 19590 54910 2 74500 18400 56100 16830 57670 3 74500 18400 56100 16830 57670 4 74500 18400 56100 16830 57670 5 74500 18400 56100 16830 57670 6 74500 9200 65300 19590 54910Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.