Requirements 1. 2. 3. Calculate the after-tax cash inflows and outflows of the modernize and replace alternatives over the 2018 - 2024 period. Calculate the net present value of the modernize and replace alternatives. Suppose Expert Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. Expert Chips has been approached by Spain, Malaysia, and Australia to construct plants in their countries. Briefly describe in qualitative terms the income tax features that would be advantageous to Expert Chips. Print Done after-tax cash inflows and outflows of the modernize and replace alternatives over the 2018 - 2024 pe i Data Table beweeth tive. valud i you More Info The following data on the two options are available: Modernize Replace 63,800,000 Initial investment in 2018 EA 37,100,000 $ 6,200,000 $ Terminal disposal value in 2024 $ Next year, in 2018, Expert Chips expects to deliver 622 prototype chips at an average price of $55,000. Expert Chips' marketing vice president forecasts growth of 45 prototype chips per year through 2024. That is, demand will be 622 in 2018, 667 in 2019, 712 in 2020, and so on. 15,500,000 : Useful life 7 years 7 years Total annual cash operating cost per prototype chip $ 36,500 $ 29,000 The plant cannot produce more than 602 prototype chips annually. To meet future demand, Expert Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,200,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alternative. Expert Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, we assume no change in prices or costs in future years. The investment will be made at the beginning of 2018, and all transactions thereafter occur on the last day of the year. Expert Chips' required rate of return is 18%. There is no difference between the modernize and replace alternatives in terms of required working capital. Expert Chips pays a 30% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the same 30% rate. Print Done Print Done om Net Casn Present value PV factor Inflow of Cash Flows Net initial investment After-tax cash flows from operations: Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 MUITO DIE Present value of after-tax cash flow from x II sale of equipment Present value of annuity of equal income tax cash savings from annual depreciation x Net present value Choose from any list or enter any number in the input fields and then continue to the next question. Net Casn Present value PV factor Inflow of Cash Flows Net initial investment After-tax cash flows from operations: Dec 31, 2018 = Dec 31, 2019 Dec 31, 2020 X Dec 31, 2021 Dec 31, 2022 Dec 31, 2023 Dec 31, 2024 X Present value of after-tax cash flow from X sale of equipment Present value of annuity of equal income tax cash savings from annual depreciation TION X Net present value Requirement 3. Suppose Expert Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. Expert Chips has been approached by Spain, Malaysia, and Australia to construct plants in their countries. Briefly describe in qualitative terms the income tax features that would be advantageous to Expert Chips. Select five income tax features that would be advantageous for the company. Expert Chips would prefer to: 1. 2. 3. 4. 5. It wants to have the most advantageous tax position possible. Expert Chips has been approached by Spain, Malaysia, and Australia to construct plants in their be advantageous to Expert Chips. Requ coun have depreciation expense exempt from taxation. Selec have lower tax rates. have revenue exempt from taxation. Expe recognize cost deductions in earlier years rather than later years. 1. recognize cost deductions in later years rather than earlier years. 2. recognize taxable cost deductions greater than actual outlay costs. 3. recognize taxable revenues in earlier years rather than later years. 4. recognize taxable revenues in later years rather than earlier years. 5. Choose from any list or enter any number in the input fields and then continue to the next