CHUSSEN Daily Interprises is purchasing a $10.3 million machine. It will cost $48,000 to transport and install the machine. The machine has a depreciable life of 5 years, is using straight-line depreciation, and will have no salvage value. The machine will generate incremental revenues of $3,5 million per year along with incremental costs of $1 13 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises. n. If Daily Enterprises decides to use MACRS instead of straight-line depreciation, how would the incremental free cash flows associated with the new machine change? Under the TCJA of 2017, Daily Enterprises has the option to take 100% "Bunus" depreciation in the year in which the equipment is put into use. This means that in that year, it would take the full depreciation expense equivalent to the cost of buying the equipment. If Daily does so, which cash flows would increase and which would decrease? How does this compare to MACRS? BESED RUVIL WOLIN De jure, I DIN PI rese years at jumui tiidit 20 10. Urman, vi prese value of ane ne vabil nuws woulu crease unter WALRO VEDELI SE Select from the drop-down menu.) Is the above statement true or false? b. Under the TCJA of 2017. Daily Enterprises has the option to take 100% "Bonus" depreciation in the year in which the equipment is put into use. This means that in that year, it would take the full depreciation expense equivalent to the most of buying the equipment. If Daily does so, which cash flows would increase and which would decrease? How does this compare to MACRS? (Select all the choices that apply) A. In the case of Daily Enterprises we assume that it puts the machine into use immediately, as seen by the MACRS expense in year 0 Thus, Daily would take 100% of the depreciation expense in year 0 so that the entire cost of the equipment is deducted from taxes that year B. With its taxes reduced, the incremental cash flow in year 0 is increased With 100% of the depreciation expense used in year 0, Daily would have no incremental depreciation in years 1 through 6 However, by accolorating the entire tax deduction to year the present value of the incremental free cash flows would increase under bonus depreciation Compared to MACRS, the effect will be lous dramatic hin similar MACKS puts more than half of the depreciation in years 0 and 1 (20% +32%), whereas bonus depreciation puts 100% in year 0. Thus, again the incremental free cash flow will be higher in year but lower in years 1 through 5, and the present value of those cash flows will be greater Do. Compared to MACRS, the effect will be less dramatic but similar MACRS puts more than half of the depreciation in years 0 and 1 (20% +19.20%), whereas bonus depreciation puts 100% in year D. Thus, again the incremental free cash flow will be higher in year but lower in years through and the present value of those cash flows will be greater. Next This questions Daily Enterprises is purchasing a $10.3 million machine. It will cost $48,000 to transport and install the machine. The machine has a depreciable life of 5 years, is using stm The machine will generate incremental revenues of $3.5 million per year along with incremental costs of $1.13 million per year. Daily's marginal tax rate is 21% You are for a. If Daily Enterprises decides to use MACRS instead of straight-line depreciation, how would the incremental free cash flows associated with the new machine change? b. Under the TCJA of 2017, Daily Enterprises has the option to take 100% "Bonus" depreciation in the year in which the equipment is put into use. This means that in that - to the cost of buying the equipment. If Daily does so, which cash flows would increase and which would decrease? How does this compare to MACRS? a. If Daily Enterprises decides to use MACRS instead of straight-line depreciation, how would the incremental free cash flows associated with the new machine change? "The incremental cash flows would increase in years 0 and 1, as the accelerated depreciation schedule would give Daily Enterprises a higher tax shield during those two ye Blows would be lower, since the depreciation expenses in these years are lower than 20%. Overall, the present value of the free cash flows would increase under a MACRS is the above statement true or false? True (Select from the drop-down menu.) b. Under the TCJA of 2017, Daily Enterprises has the option to take 100% "Bonus" depreciation in the year in which the equipment is put into use. This means that in that y equivalent to the cost of buying the equipment. If Daily does so, which cash flows would increase and which would decrease? How does this compare to MACRS? (Select A. In the case of Daily Enterprises, we assume that it puts the machine into use immediately, as seen by the MACRS expense in year 0. Thus, Daily would take 100% entire cost of the equipment is deducted from taxes that year B. With its taxes reduced, the incremental cash flow in year 0 is increased. With 100% of the depreciation expense used in year 0. Daily would have no incremental dep accelerating the entire tax deduction to year 0, the present value of the incremental free cash flows would increase under bonus depreciation C. Compared to MACRS, the effect will be less dramatic, but similar MACRS puts more than half of the depreciation in years 0 and 1 (20 % + 32 %), whereas bonus dep incremental free cash flow will be higher in year 0, but lower in years 1 through 5, and the present value of those cash flows will be greater Submit quiz on machine. It will cost $48,000 to transport and install the machine. The machine has a depreciable life of 5 years, is using straight-line depreciation, and will have no salvage value. nues of $35 million per year along with incremental costs of $1.13 million per year. Daily's marginal tax rate is 21% You are forecasting incremental free cash flows for Daily Enterprises. as instead of straight-line depreciation, how would the incremental free cash flows associated with the new machine change? han the option to take 100% "Bonus depreciation in the year in which the equipment is put into use. This means that in that year, it would take the full depreciation expense equivalent does so, which cash flows would increase and which would decrease? How does this compare to MACRS? CED RS instead of straight-line depreciation, how would the incremental free cash flows associated with the new machine change? in years 0 and 1, as the accelerated depreciation schedule would give Daily Enterprises a higher tax shield during those two years. In years 2 through 5, the incremental free cash expenses in these years are lower than 20%. Overall, the present value of the free cash flows would increase under a MACRS depreciation schedule. (Select from the drop-down menu.) es has the option to take 100% Bonus depreciation in the year in which the equipment is put into use. This means that in that year, it would take the full depreciation expense ent. If Dally does so, which cash flows would increase and which would decrease? How does this compare to MACRS? (Select all the choices that apply.) assume that it puts the machine into use immediately, as seen by the MACRS expense in year 0. Thus, Daily would take 100% of the depreciation expense in aucted from taxes that year. year 0 so that the ontal cash flow in year 0 is increased With 100% of the depreciation expense used in year 0, Daily would have no incremental depreciation in years 1 through 6. However, by an to year 0, the present value of the incremental free cash flows would increase under bonus depreciation - be loss dramatic, but similar. MACRS puts more than half of the depreciation in years 0 and 1 (20% 32%), whereas bonus depreciation puts 100% in year D. Thus, again the higher in year 0, but lower in years 1 through 5, and the present value of those cash flows will be greater Next