Deductions associated with equipment for first five years

Assignment Help Financial Management

Reference no: EM131341452

Spherical Manufacturing recently spent $12 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 25% and? Spherical's marginal corporate tax rate is 32%.

a. What are the annual CCA deductions associated with this equipment for the first five? years?

b. What are the annual CCA tax shields for the first five? years?

c. What is the present value of the first five CCA tax shields if the appropriate discount rate is 10% per? year?

d. What is the present value of all the CCA tax shields assuming the equiment is never sold and the appropriate discount rate is 10% per? year?

e. How might your answer to part? (d) change if Spherical anticipates that its marginal corporate tax rate will increase substantially over the next five? years?

Reference no: EM131341452

Questions Cloud

The external analysis of the company begins : Once financial statements are made public, the external analysis of the company begins by. __ employer businesses (businesses that employ others besides the owners) will close within the first six years

Generic bank receives new demand deposits : 1st Generic Bank receives new demand deposits of $1.8 million. Their current reserve requirement is 6%. 1st Generic has $90,000 in vault cash and $100,000 at the the Federal Reserve that has not been invested yet. How much does the bank have availabl..

Incremental cost of going outside versus conducting survey : Each year, Sunshine Motos surveys 7,500 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to Global Associates, who have offered to conduct the survey ..

Management estimates increased revenue from ticket : The Hannibal Homers minor league baseball club is considering an expansion of its stadium to increase capacity by 2,000 seats. Management estimates increased revenue from ticket and concession sales to be $600,000 per year for the next 5 years. Annua..

Deductions associated with equipment for first five years : Spherical Manufacturing recently spent $12 million to purchase some equipment used in the manufacture of disk drives. This equipment has a CCA rate of 25% and? Spherical's marginal corporate tax rate is 32%. What are the annual CCA deductions associa..

Compute percentage total return : Suppose a stock had an initial price of $82 per share, paid a dividend of $1.20 per share during the year, and had an ending share price of $90. Compute the percentage total return.

What is value of annual deposit : It is desired to accumulate a fund of $1000 at the end of 8 years by equal deposits at the beginning of each year. If the deposits earn interest at 8% effective but the interest can be reinvested at only 5% effective. What is the value of annual depo..

About the covariance stock : What can be said about the covariance between Stock A and Stock B? (This question has only 3 possible answer choices – no choice D and no choice E)

Stock expected return and stock standard deviation : What comes closest to Stock A’s expected return and Stock B’s standard deviation?

User Account

All Pages