Present value of tax savings related to operating losses

Assignment Help Financial Accounting

Reference no: EM13864229

1. Calculate Present Value. Mary Martinez is ready to retire and has a choice of three pension plans. Plan A provides for an immediate cash payment of $350,000. Plan B pro- vides for the payment of $40,000 per year for 8 years and the payment of $200,000 at the end of year 8. Plan C will pay $35,000 per year for 8 years. Mary Martinez desires a return of 8 percent. Determine the present value of each plan and select the best one.

2. Cash Flow Implications of Tax Losses. WesternGear.com is expected to have operating losses of $350,000 in its first year of business and $270,000 in its second year. However, the company expects to have income before taxes of $400,000 in its third year and $650,000 in its fourth year. The company’s required rate of return is 14 percent.

Required

Assume a tax rate of 35 percent and that current losses can be used to offset taxable income in future years. What is the present value of tax savings related to the operating losses in years 1 and 2?

Reference no: EM13864229

Questions Cloud

Weighted-average process-costing system : Peach Company uses a weighted-average process-costing system. Company records disclosed that the firm completed 40,000 units during the month and had 10,000 units in process at month-end, 20% complete. If conversion is incurred uniformly throughout ..

The band gap of the indium gallium arsenide sample in ev : The band gap of indium gallium arsenide varies based on the concentration of gallium in the material. A sample of indium gallium arsenide absorbs light with a wavelength less than 1.37 microns. What is the band gap of the indium gallium arsenide samp..

Determine the molar free energy of vaporization : Determine the molar free energy of vaporization, Delta vapG, for benzene at 75 C and 1 bar given that the molar enthalpy of vaporization of benzene at its normal boiling point of 80.09 C and 1 bar is 30.72 kJ⋅mol-1.

Calculate the reactor volumes required to process : 3.5 Calculate the reactor volumes required to process I043 liter/min of 3 molar .4 in the aqueous reaction A -+ 2B for PFTR and CSTR reactors. (a) 90% conversion, k 2 min-I (b) 99% conversion, k = 2 mole liter-' min-(c) 99.9% conversion, k 2 mole lit..

Present value of tax savings related to operating losses : Calculate Present Value. Mary Martinez is ready to retire and has a choice of three pension plans. Plan A provides for an immediate cash payment of $350,000. Assume a tax rate of 35 percent and that current losses can be used to offset taxable income..

Identify two microeconomics and two macroeconomics principle : Identify two microeconomics and two macroeconomics principles

Find the current in time domain and calculate its value : Find the Current in Laplace domain(s domain).(show all your work). Find the Current in time domain and calculate its value at t=5ms

Increase the sales price and the fixed costs : The company expects to sell 2,500 units next year. They don’t want to increase the sales price and the fixed costs can’t be changed. How much could they afford to pay in variable costs (per unit) if they want a pre-tax operating profit of $40,000?

For investment period of three years and an interest rate : Two alternatives are suggested for improvement to a power generation plant. Alternative A costs $60,000 and provides yearly benefit of $16,000. Alternative B requires $84,000 of initial cost. However, it will yield benefits in the order of $22,000 pe..

User Account

All Pages