Question
Chevron Phillips (CP) has put into place new laboratory equipment for the production of chemicals; the cost is $1,800,000 installed. CP borrows 45% of all
Chevron Phillips (CP) has put into place new laboratory equipment for the production of chemicals; the cost is $1,800,000 installed. CP borrows 45% of all capital needed, and the borrowing rate is 12.5%. In the 1st year, 25% of the principal borrowed will be paid back. The throughput rate for in-process test samples has increased the capacity of the lab, saving a net of $X per year. In this 1st year, depreciation is $360,000 and taxable income is $328,000.
What is the gross income or annual savings $X
Determine the income tax for the 1st year assuming a marginal tax rate of 40%
What is the after-tax cash flow for the 1st year?
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