Present value of tax benefits from depreciation

Assignment Help Financial Management
Reference no: EM13939380

Your company is considering a new project that will require $825,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $141,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm’s tax rate is 35 percent.

Estimate the present value of the tax benefits from depreciation. (Round your answer to 2 decimal places)

  Present value $   

Reference no: EM13939380

Questions Cloud

Draft of the communication audit : The purpose: To provide a member of your class with meaningful feedback about his/her draft of the communication audit. The Task: You need to provide your peer with feedback in the following areas. 1. Does the document meet the brief--exactly?
Net payoff that you will receive from each warrant : Saunders Corporation currently has 1,000,000 common stocks outstanding. It considers raising $10 million through issuing 20-year 7.5% coupon bonds – annually paid - with 10 warrants. Each bond has a face value of $1,000. Each warrant gives the holder..
Evaluating two different cookie-baking ovens : You are evaluating two different cookie-baking ovens. The Pillsbury 707 costs $69,500, has a 5-year life, and has an annual OCF (after tax) of –$11,200 per year. The Keebler CookieMunster costs $96,000, has a 7-year life, and has an annual OCF (after..
Discuss convertibles and warrants : Discuss Convertibles and Warrants. Would convertibles and warrants influence your decision to buy or not buy an investment? Give an example.
Present value of tax benefits from depreciation : Your company is considering a new project that will require $825,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $141,000 using straight-line depreciat..
What is conversion value of each convertible bond at year : Frye Inc. is considering raising the new capital through issuing convertible bonds which will be sold at par, carry a coupon rate of 6% - annually paid, have 20-year maturity, and can be converted into 23 shares of stock. The bonds would be non calla..
Describe the cultural factors that influence sexual attitude : Compare the similarities and differences of sexual attitudes and behaviors in each culture. Describe the cultural factors that influence sexual attitudes and behaviors. Explain how sexual attitudes and behaviors are perceived and displayed within eac..
Considering investing in project that increases annual costs : You are considering investing in a project that increases annual costs by 25,000 per year over the projects 5 year life. The project has an initial cost of 500,000 and will be depreciated straight line over 5 years to a salvage value of 0. Assume a 3..
The conversion value exceeds the call price : Central Food Brokers is considering issuing a 20-year convertible bond that will be priced at its par value of $1,000 per bond. The bonds have a 12 percent annual coupon interest rate, and each bond could be converted into 30 shares of common stock. ..

Reviews

Write a Review

Financial Management Questions & Answers

  What is weighted average cost of capital

The Black Bird Company plans a $45 million expansion. The expansion is to be financed by selling $35 million in new debt and $10 million in new common stock. The before tax required rate of return on debt is 7% and the required rate of return on equi..

  Systemic risk evaluates the probability

Systemic risk evaluates the probability and extent of negative consequences to the larger body. For example, the government has a record of intervening in the event of a probable bank failure; the government’s larger concern is the negative impact on..

  Callable bond outstanding on the market

Fooling Company has a 10.2 percent callable bond outstanding on the market with 25 years to maturity, call protection for the next 10 years, and a call premium of $50. What is the yield to call (YTC) for this bond if the current price is 109 percent ..

  What is the coupon rate of the bond

Solvent Insurance, Inc issued a 10 year bond 3 years ago. The bonds are currently selling for 95% of par value, with a YTM of 6%. What is the coupon rate of the bond? Please explain!

  Draft budgeted financial statements from 2012 to 2015

Explain how purchase of the apple press might affect the company's revenue goals. Based on this information, explain whether Anthony's Orchard should invest in the apple press.

  Incremental cash flow in your capitol budgeting analysis

Your company manufactures sports equipment. You are considering replacing a brand of golf clubs with a new line of golf clubs. which of the following is not considered to be an incremental cash flow in your capitol budgeting analysis?

  Considering two savings options

You are considering two savings options. Both options offer a rate of return of 11 percent. The first option is to save $2,500, $1,500, and $3,000 at the end of each year for the next three years, respectively. The other option is to save one lump su..

  What is the default risk premium on the corporate bond

A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.6%. What is the default risk premium on the corporate bond?

  Use straight-line depreciation to zero over projects life

You are evaluating two different silicon wafer milling machines. The Techron I costs $213,000, has a three-year life, and has pretax operating costs of $54,000 per year. The Techron II costs $375,000, has a five-year life, and has pretax operating co..

  Inventory and accounts receivable without violating terms

Sees Inc. has an agreement with it banks that allow Sees to borrow money on a short term basis to finance its inventories and accounts receivable. The agreement requires Sees to maintain a current ratio of 2.1 or higher and a debt ratio of 65% or low..

  Big stevies is the maker of swizzle sticks

Big Stevie's is the maker of swizzle sticks; they are considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $90,000 and will generate net cash inflows of $21,000 a year for 9 years.

  Relation between present values and interest rates

What do your answers to these questions tell you about the relation between present values and interest rates and between present values and the number of compounding periods per year? Calculate the future value in five years of $5,000 received today..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd