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Use the following information for questions 13 and 14. Saigon Green is considering buying some new equipment to boost sales. Equipment investment is $ 500,000,
Use the following information for questions 13 and 14. Saigon Green is considering buying some new equipment to boost sales. Equipment investment is $ 500,000, applying straight line depreciation and useful life of equipment is 5 years. The profitability of the company is 15%. Below is the company's expected annual earnings report.
Sales Revenue | $ 500,000 |
Cost does not include depreciation | $ 300,000 |
Depreciation | $ 100,000 |
The total cost | $ 400,000 |
Taxable income | $ 100,000 |
Income tax (20%) | $ 20,000 |
Net income | $ 80,000 |
13. Estimated annual cash flow is _____. a. $ 120,000 b. $ 180,000 c. $ 110,000 d. $ 100,000
14. The present value of the annual tax savings from depreciation is _____. a. $ 80,000 b. $ 67,043 c. $ 81,584 d. $ 94,822
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