Reference no: EM13832615
An international Corporation purchased a jet plane for use by the firm's engineers. It has an initial cost of $1,000,000, and will be sold by $500,000 at the end of year 7. The plane will save the transportation fee of $500,000 yearly, and annual O&M costs will be $100,000. The corporation operates in a state that has a corporate tax rate of 8% and the incremental federal tax is 34%.
1. Show before-tax cash flows (BTCF) for n=0 to n=7.
2. Compute the depreciation schedule using MACRS Depreciation.
3. Determine taxable incomes for n=0 to n=7.
4. Compute the combined (federal + state) income tax rate for Wang Systems Corporation. Use this rate as after-tax effective rate and compute income taxes.
5. Show after-tax cash flows (ATCF) for n=0 to n=7.
6. Find the PW for the corporation after taxes, if MARR is 10%, and determine if this purchase is satisfactory.
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