P11-16 (similar to) Question Help Operating cash inflows Afirm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.81 million plus $112,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table ? ). Additional sales revenue from the renewal should amount to $1.17 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 41% of the additional sales. The firm is subject to a tax rate of 40%. (Note: Answer the following questions for each of the next 6 years.) a. What incremental earnings before depreciation, interest, and taxes will result from the renewal? b. What incremental net operating profits after taxes will result from the renewal? * Data Table c. What incremental operating cash inflows will result from the renewal? a. The incremental profits before depreciation and tax are $ . (Round to the nearest dollar.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 10 years 33% 20% 14% 10% 45% 32% 25% 18% 15% 19% 18% 14% 7% 12% 12% 12% 12% 9% 9% 7% 6% 6% 6% 4% Totals 100% 100% 100% *These percentages have been mounded to the nearest whole nercent to simplify calculations while VOOWN 9% 5% 8% 100% Print Done Enter your answer in the answer box and then click Check Answer. Loparts 12 remaining Clear All Check Answer P11-16 (similar to) Question Help Operating cash inflows Afirm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.81 million plus $112,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period (see table ? ). Additional sales revenue from the renewal should amount to $1.17 million per year, and additional operating expenses and other costs (excluding depreciation and interest) will amount to 41% of the additional sales. The firm is subject to a tax rate of 40%. (Note: Answer the following questions for each of the next 6 years.) a. What incremental earnings before depreciation, interest, and taxes will result from the renewal? b. What incremental net operating profits after taxes will result from the renewal? * Data Table c. What incremental operating cash inflows will result from the renewal? a. The incremental profits before depreciation and tax are $ . (Round to the nearest dollar.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 10 years 33% 20% 14% 10% 45% 32% 25% 18% 15% 19% 18% 14% 7% 12% 12% 12% 12% 9% 9% 7% 6% 6% 6% 4% Totals 100% 100% 100% *These percentages have been mounded to the nearest whole nercent to simplify calculations while VOOWN 9% 5% 8% 100% Print Done Enter your answer in the answer box and then click Check Answer. Loparts 12 remaining Clear All Check
