Answer 12-12

Ajax uses straight-line up (b) What is the book value of the machine al LU (c) Ajax Manufacturing earns a net profit before tax (also called a taxable income) of $28,800,000. How much tax would Ajax owe for this year? Contributed by Paul R. McCright, University of South Florida 12-12 The effective combined tax rate in a firm is 28%. An outlay of $2 million for certain new assets is under consideration. Over the next 9 years, these assets will be responsible for annual receipts of $650,000 and annual disbursements (other than for income taxes) of $225,000. After this time, they will be used only for stand-by purposes with no future excess of receipts over disbursements. (a) What is the prospective rate of return before income taxes? (b) What is the prospective rate of return after if straight-line depreciation can be used to w off these assets for tax purposes in 9 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? A project using passive heating/cooling design con- cento