Xyz company is allowing for purchasing an asset for 100000

Reference no: EM13352118

XYZ Company is allowing for purchasing an asset for $100,000 that has a 5 year useful life and a $20,000 salvage value. Double declining balance (DDB) depreciation can be used. The asset can produce $50,000/year in savings but will cost $10,000/year to operate. The company is subject to a 35 percent federal income tax rate and a 9 percent state income tax rate. It uses an after-tax MARR of 20%

1). Evaluate the combined (state+ federal) income tax rate for XYZ company. Use this rate for evaluating after tax cash flows

2). Evaluate the after tax cash flow for this investment. Make adjustment in the DDB depreciation charges if required in any year in light of SV of $20K

3). Using the after tax rate of return or present worth, evaluate if this investment is worth.

4). Consider the company sells the asset as the end of the third year for $30,000. Evaluate the equipment's final book value in Year 3 and the depreciation recapture.

Reference no: EM13352118

Questions Cloud

Wallace corporation was looking to leasing a senior : wallace corporation was looking to leasing a senior administrative assistant. after hr reviewed the applications of the

Waters inc acquired 10 of denton corporation on 1st : waters inc. acquired 10 of denton corporation on 1st january 2012 for 297400 though dentons book value on that date

The manager of the manufacturing unit of an organization is : the manager of the manufacturing unit of an organization is responsible for the costs of the manufacturing unit. the

Write at 1050 word paper around how richard branson of : write at 1050 word paper around how richard branson of virgin group has increased his companys sustainable business

Xyz company is allowing for purchasing an asset for 100000 : xyz company is allowing for purchasing an asset for 100000 that has a 5 year useful life and a 20000 salvage value.

Q1 bob stole a check from the back of his girlfriends check : q1 bob stole a check from the back of his girlfriends check book. bob accomplished the check for 500 and signed his

Lemmon cos 31st march inventory of raw materials is 150000 : lemmon co.s 31st march inventory of raw materials is 150000. raw materials buys in april are 410000 and factory payroll

Project : project nbspnbspnbspnbspnbspnbspnbspnbspnbspnbspnbspnbspnbspnbspnbspnbspinitial investment

Accents associates sells only single product with a current : accents associates sells only single product with a current s.p. of 90 per unit. variable costs are 40 of this selling

User Account

All Pages