12-23

Corp, owns a piece of petroleurn nlling equipment that costs $100,000 and will be depreciated over 10 years by double declining bal recation There is a combined 40% tax rate. Shellout will lease the equipment to others and each year receive $30,000 in rent. At the end of 5 years, the end of 6 years is ass is thought to be $1,00,0 shown in the before-tax c e firm will sell the equipment for $35,000. What is the after-tax rate of return Shellout will receive trom Year this equipment investment? 12-22 An automaker is buying some special tools for A $100,000. The tools are being depreciated by dou ble declining balance depreciation using a 4-year depreciable life and a $6250 salvage value expected the tools will actually be kept in service or 6 years and then sold for $6250. The before-tax benefit of owning the tools is as follows: Year Before-Tax Cash Flow $30,000 30,000 35,000 40,000 If the firm wants a 9 its combined incremm determine by annual investment is desirah SOYD Depreciation 12-25 A firm has invested 6,250 Selling price year useful life. The value, as the cost t Compute the after-tax rate of return for this investment situation, assuming a 46% incremental tax rate. value. The uniform ery are $3600. For a and sum-of-years' after-tax rate of retu 12-23 This is the continuation of Problem 12.-22. Instead of A 12-22. Instead of 1226 A farmer harvester's operatin paying $100,000 cash for the tools, the corporation will pay $20,000 now and borrow the remain- ing $80,000. The depreciation schedule will remain unchanged. The loan will be repaid by 4 equal end-of-year payments of $25.240. year but the harve labor costs. It wa years using the SO value of S30,000. only $10,000 at th income tax rate o per year, determin this investment. C Wayne State Unive Prepare an expanded cash flow table that takes into account both the special tools and the loan. (a) Compute the after-tax rate of returm for the tools, taking into account the $80,000 loan