If the before-tax cash flow, including salvage value, at the end of 6th year is
ID: 2647876 • Letter: I
Question
If the before-tax cash flow, including salvage value, at the end of 6th year is $600,000 in then-current dollar, and the cost basis for 5-year capital equipment is $600,000, then the then-current dollar taxable income at the end of 6th year is
A.
Cannot be determined without knowing inflation rate.
B.
$565,440.00
C.
$582,720.00
D.
$530,880.00
Suppose the fixed loan rate is 18% and the real after-tax MARR is 10%, then payment plan 4 will be the best compared to plans 1, 2, and 3 when the inflation rate is bigger than 8%.
True
False
Suppose after-tax MARR is 10%, income tax rate is 40%, and inflation rate is 6%, then payment plan 3 dominates 2 of the other three plans (1, 2, and 4) when the fixed loan rate is larger than 16.6%.
True
False
Consider the calculation of EBIT, times interest earned ratio, accounts receivable turnover, current ratio. How many of them require the data from income statement?
2
4
0
3
A.
Cannot be determined without knowing inflation rate.
B.
$565,440.00
C.
$582,720.00
D.
$530,880.00
Explanation / Answer
Solution :
If the before-tax cash flow, including salvage value, at the end of 6th year is $600,000 in then-current dollar, and the cost basis for 5-year capital equipment is $600,000, then the then-current dollar taxable income at the end of 6th year is
answer -
A.
Cannot be determined without knowing inflation rate.
Suppose the fixed loan rate is 18% and the real after-tax MARR is 10%, then payment plan 4 will be the best compared to plans 1, 2, and 3 when the inflation rate is bigger than 8%.
answer -
True
Suppose after-tax MARR is 10%, income tax rate is 40%, and inflation rate is 6%, then payment plan 3 dominates 2 of the other three plans (1, 2, and 4) when the fixed loan rate is larger than 16.6%.
answer -
True
Consider the calculation of EBIT, times interest earned ratio, accounts receivable turnover, current ratio. How many of them require the data from income statement?
answer -
A . 2
A.
Cannot be determined without knowing inflation rate.
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