Answered step by step
Verified Expert Solution
Question
1 Approved Answer
3) The effective combined tax rate in an owner managed corporation is 40%. An outlay of $20,000 for certain new assets in under consideration. It
3) The effective combined tax rate in an owner managed corporation is 40%. An outlay of $20,000 for certain new assets in under consideration. It is estimated that for the next 8 years, these assets will be responsible for annual receipts of $6,000 and annual disbursements (other than for income taxes) of $2500 (from Straight Line depreciation). After this time, they will be used only for stand by purposes, and no future excess of receipts over disbursements is estimated. (a) What is the prospective rate of return before income taxes? (b) What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 8 years? (c) What is the prospective rate of return after taxes if it is assumed that these assets must be written off for tax purposes over the next 20 years, using straight-line depreciation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started