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Taxes and Depreciation Extra Problems. P=$15,000, Depr. is SOYD, Tax % = 50%. a. Compute the before and after tax cash flows for this company associated with this project. b. Show the equations that must be solved to determine the after tax NPW and ROR.

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p 15 000 depr is soyd tax 50
P=$15,000, Depr. is SOYD, Tax % = 50%
  • a. Compute the before and after tax cash flows for this company associated with this project.
  • b. Show the equations that must be solved to determine the after tax NPW and ROR.
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d. If you used the straight line method of depreciation rather than SYD, would this tend to make the investment more or less acceptable? Explain your answer.

  • e. How would the ATCF change if you sold the asset after three years for a salvage of $10,000? You are using the SYD method for depreciation.
  • f. How would the ATCF change if you sold the asset after 3 years for a salvage of $0?
  • g. The asset below involves only costs. Use the ACRS method with a class life of 3 years. The ACRS percentages are: 33.33%, 44.45%, 14.81%, and 7.41%. Fill in lines 1, 4, 5 and Salv.
  • Comparing alternatives with Taxes
  • 2. Use the rate of return method to choose the best one. The After Tax MARR is 20%.
  • Alternative A B C Initial Investment 100,000 70,000 50,000 Annual Costs 30,000 40,000 50,000 Life 10 10 10 Salvage 0 0 0 .Straight Line Depreciation, Tax Life 5 years, Tax Salvage 0.
  • .Straight Line Depreciation, Tax Life 10 years, Tax Salvage 0.
  • c. SYD Method, Tax Life 10 years, Tax Salvage 0.
  • 3. Two projects have the data given below. You may choose neither, but you can’t choose both. For each situation given below, write equations for the quantity or quantities to be computed. Indicate how you will make your selection. The After Tax MARR is 9%.
  • a. Straight Line Depreciation, Tax Life 5 years, Tax Salvage 0.
  • b. Straight Line Depreciation, Tax Life 10 years, Tax Salvage 0.
  • c. Straight Line Depreciation, Tax Life = Estimated Life, Tax Salvage = Estimated Salvage..
  • d. SYD Method, Tax Life 5 years, Tax Salvage 0.