What is the depreciation tax shield

Assignment Help Financial Management
Reference no: EM131983807

Consider the following income statement for Chocoholics Ananymous: Sales $ 547,440 Fixed & Variable Costs $ 356,160 Depreciation $ 81,000 Taxes 30 % Dividends $ 50,000 Required:

(a) Calculate the EBIT.

(b) Calculate the net income. Recall that in this chapter the interest expense is assumed to be zero (projects are financed with equity).

(c) Calculate the OCF.

(d) What is the depreciation tax shield? That is, how much money does the depreciation save the company each year?

Reference no: EM131983807

Questions Cloud

Modernize its production machinery : Chocoholics Anonymous wants to modernize its production machinery. what is the EAC for machine Baileys?
What is the firm cost of preferred stock : The market rate of return is 13 percent and the firm's tax rate is 33 percent. What is the firm's cost of preferred stock?
What does it mean when bond is selling at discount : What does it mean when a bond is selling at a discount? What does it mean when a bond is selling at par?
What is the forward premium-discount implied by CIRP : how many (pre-tax) dollars will you have? What is the forward premium/discount implied by CIRP?
What is the depreciation tax shield : Calculate the EBIT. What is the depreciation tax shield?
Produces coats and jackets for seattle market : Winter Tyme, Inc., produces coats and jackets for the Seattle market. What is the project's start-up cost, the year 0 cash flow from assets?
What would be the cost today of this hedging strategy : What would be the cost today of this hedging strategy? What is the minimum dollar revenue that UUU will receive if they hedge with options?
What is the after-tax cash flow from the sale of asset : If the relevant tax rate is 33 percent, what is the after-tax cash flow from the sale of this asset?
What is the current yield or cost of the preferred stock : What is the current yield or cost of the preferred stock?

Reviews

Write a Review

Financial Management Questions & Answers

  What will be the amount of your monthly mortgage payment

The house you want to buy costs $277 thousand. You plan to make a cash down payment of 10 percent, and borrow the rest in a 30 year mortgage at 3.49 percent APR. What will be the amount of your monthly mortgage payment?

  Put options described above in order to make initial value

A number of the put options described above in order to make the initial value ?0 of your portfolio equal to zero.

  Perspectives on corporate governance

Describe each of the following perspectives on corporate governance: financial economics perspective; social perspective.

  What is the optimal number of contracts to buy or sell

Using futures contract what is the optimal number of contracts to buy or sell?

  How much interest was paid in cash for these bonds

The financial statement notes for Green Duck Inc. show the following information about the company's 6%, 5 year bonds with a face amount of $12,000 due in December 2012. The bonds pay interest semi-annually on June 30 and December 31. How much intere..

  Determine whether the equation is identified

it is over-identified There is insufficient information given in the question to determine whether the equation is identified or not.

  How does the the selected mnc manage its capital -cashflow

Select a Multi National Corporation (MNC) in the Caribbean region and answer the following question in 500 words or less.

  Profile of company celcom the length

Write the profile of company "celcom" the length should be about 2 pages (should include the management information system the company use)

  What is the portfolio expected returns

What is the portfolio's expected returns? What is the portfolio beta? What are the dollar returns?

  Application using the same cost of carry model

Suppose the spot price for Euro is $1.15, the futures price for delivery in 6 months is $1.1471286. Assume that the 6 month borrowing/lending rate in Euro is 0.75percent (annually, continuous compounding) and the corresponding rate in $ is 0.25percen..

  The black-scholes model

Find the Black-Scholes model price for a call on SilGrah Stock, give that the stocks are currently traded at $40, the strike price of the call is $40, the time to expiration is 3 months, the risk free rate is 5% per annum, and the standard deviation,..

  Sales from the contract are forecast

Sales from the contract are forecast at $380,000 each year. Variable costs are estimated at $250,000 the first year, and Jo believes they will decrease at the rate of $5000 per year, as they become expert in growing the new items in the new greenhous..

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