Evergreen corporation a calendar year accrual basis

Reference no: EM13393327

Evergreen Corporation, a calendar year, accrual basis taxpayer, requires a new piece of equipment for use in its manufacturing business. The company would like to determine whether it would be cost beneficial to invest in the equipment and has asked you to determine the present value of the after-tax cost of purchasing the equipment.

The equipment will cost $75,000 and qualifies as a 5 year asset under the MACRS classification. Evergreen would use the equipment for 5 years. At the end of the five years, Evergreen estimates that it could sell the equipment for $10,000. Assume that bonus depreciation and the Sec. 179 expensing option are not available.

Calculate the present value of after-tax cash flows that would result if Evergreen purchases the equipment. Assume a 6% discount rate. Assume that the cash payment for the machine occurs at the beginning of year 1, and all other cash flows, including tax costs and benefits, occur on the last day of the year. Before consideration of this purchase, Evergreen estimates that its marginal tax rate will be 35% for the next five years. Hint: Consider the effects of the cash payment for the asset, cash flow from the sale of the asset, and tax effects of any income, deduction, gain, or loss related to the equipment.

Reference no: EM13393327

Questions Cloud

Calculate the equilibrium output in this economy find : 1 consider the following open-economyc 1000 08ydi 500g 400t 300ex 400im 005yda. compute the equilibrium output

Ttle your substantive post with the name of the brand eg : using concepts from the textbook students will create their own substantive post and address the followingbased on the

Explain elasticity of demand as it pertains to elastic unit : economists use elasticity to measure consumer responsiveness to changes in the various determinants associated with

The purchasing function can simply make a contribution to : 1. compare and contrast two unique types of purchasing categories in the business world.2. the purchasing function can

Evergreen corporation a calendar year accrual basis : evergreen corporation a calendar year accrual basis taxpayer requires a new piece of equipment for use in its

What elements of a good crm program does this company use : using the company you chose to study goya foodnbsp throughout the term to build your basic marketing plan for your

How can department decide whether or not variation is : variation exists in virtually all parts of our lives. we often see variation in results in what we spend utility costs

Compare and contrast two unique kinds of purchasing : 1. compare and contrast two unique types of purchasing categories in the business world.2. the purchasing function can

What are current : what are current assets?a. assets purchased within the last year.b. assets which will be used within the next month.c.

User Account

All Pages