Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. The company would need to purchase a piece of equipment for $130,000 that has a useful life of five years and zero salvage value. It would be depreciated for financial reporting and tax purposes using the straight-line method. Winthrop estimated the following annual costs and revenues for the new product Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $330,000 $ 185,000 $ 83,000 The company's tax rate is 30% and its after-tax cost of capital is 16%. Click here to view Exhibit 14B-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using tables. Required: 1. Calculate the annual income tax expense arising from this investment. 2. Calculate the net present value of this investment opportunity. Note: Round your final answer to the nearest whole dollar. 1. Annual income tax expense 2. Net present value $ 10,800 SA $ 47,495 bit_148,1.htm EXHIBIT 14B-1 Present Value of $1; 1 (1+r) Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 0.962 0.952 0.943 0.935 0.926 0.917 2 0.925 0.907 0.890 0.873 0.857 0.842 3 0.889 0.864 0.840 4 0.855 0.823 0.792 5 0.822 0.784 0.747 6 0.790 0.746 T S 0.731 0.677 0.627 0.582 9. 10 11 0.794 0.772 0.735 0.708 0.713 0.681 0.650 0.705 0.666 0.630 0.596 0760 0711 0.665 0.623 0.583 0.547 0.540 0,703 0.645 0.592 0.544 0.500 0676 0.614 0.558 0.508 0.463 0.650 0.55 0.527 0.475 0.429 0.816 0.763 0.502 0.460 0.422 12 13 14 15 16 17 18 19 20 21 22 23 24 25 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0694 0.683 0.672 0.661 0.650 0.751 0.731 0.712 0693 0.675 0.658 0.641 0624 0.609 0593 0579 0.564 0551 0.537 0.524 0.683 0.659 0.636 0.613 0 392 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0423 0.621 0.593 0.567 0.54) 0.519 0.497 0.476 0.456 0437 0419 0402 0.386 0.370 0.355 0341 0.564 0.535 0.507 0.480 0.456 0432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0289 0.275 0.513 0.482 0452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0235 0.222 0.467 0.434 0404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0233 0.218 0.204 0.191 0179 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0209 0.194 0.180 0.167 0.155 0.144 0.386 0.352 0322 0.295 0270 0247 0.227 0.208 0.191 0176 0162 0149 0137 0136 0.116 0.388 0.350 0.317 0.287 0261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0112 0.103 0.094 0.625 0.557 0497 0444 0.397 0.356 0.319 0.286 0.257 0231 0208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.20 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.064 0.075 0.065 0.061 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0,125 0.111 0.099 0.099 0.078 0.069 0.062 0.055 0.049 0.555 0.481 0.417 0362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0057 0.051 0.045 0.040 0.534 0.458 0394 0339 0.292 0.252 0218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0513 0436 0.371 0317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.494 0.416 0.350 0.296 0.250 0212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0024 0021 0.475 0.396 0331 0.277 0.232 0194 0.164 0138 0.116 0,098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0456 0377 0312 0258 0.215 0178 0149 0.124 0.104 0.087 0.075 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0439 0.359 0.294 0.242 0.199 0.164 0.155 0.112 0.093 0.077 0.064 0.053 0.044 0.037 0.031 0.026 0.022 0.018 0.015 0013 0.011 0422 0.342 0.278 0226 0184 0150 0123 0.101 0.083 0.068 0.056 0,046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0406 0.326 0.262 0.211 0.170 0138 0.112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.015 0015 0.012 0.010 0.009 0.007 0390 0310 0.247 0.197 0.158 0.126 0.102 0.0820066 0053 0.043 0.035 0.028 0.023 0.019 0015 0013 0.010 0.005 0.375 0.295 0233 0184 0.146 0.116 0.092 0.074 0.0590047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0 0.007 0.006 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears, (1+r) Periods 4% 5% 1 0.962 0.952 6% 0.943 2 1.886 1.859 1.833 3 2.775 2.723 2.673 7% 8% 0.935 0.926 1.808 1.783 2.624 2.577 2.283 4 3.630 3.546 3.465 3.387 3.312 2 855 5 4.452 4.329 4.212 4.100 3.993 6 5.242 5.076 4.917 4.767 4.623 7 6.002 5.786 5.582 5.389 5.206 S 6.733 6.463 6.210 5971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 0.917 0909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0 1.759 1736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1566 1.547 1.528 1.509 2.531 2.487 2.444 2.402 2.361 2.322 2.246 | 2210 2.174 2.140 2.106 2.074 3.240 3.170 3.102 3.037 2.974 2914 2.798 2.743 2.690 2.639 2.589 2.540 3.890 3.791 3.696 3.605 3.517 3.433 3.274 3.199 3.127 3.058 2.991 2.926 4.486 4.355 4.231 4.111 3.998 3.889 3.685 3.589 3.498 3.410 3.326 3.245 5.033 4.868 4.712 4.564 4.423 4.288 3.922 3.812 3.706 3.605 3.508 4 207 4.078 3.954 3.837 3.726 3.352 3.784 4.160 4.039 9 7.435 7108 6.802 6.515 6.247 10 8.111 7.722 7.360 7.024 6.710 11 8.760 8.306 7887 7.499 7.139 12 9.385 88638 384 7.943 7.536 13 9.986 9.3948.853 8.358 7.904 14 10.563 9.899 9.295 8.745 8.244 15 11.118 10 380 9712 9.108 16 17 18 19 7.839 7.366 6.938 20 21 22 23 10 301 10.371 24 25 5.995 5.759 5537 5.328 5.132 4.946 4.772 6418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.494 4.339 4.192 4054 3 6 805 6.495207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4456 4.327 4.177 48 7161 6.514 6.492 6.194 5.918 5.660 5.421 5.197 4988 4.793 4.611 4.439 4.2784 7487 7103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4533 4.362 4. 7.786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611 4.432 4 8.559 8.061 7,606 7191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675 4489 43 11.652 10.838 10.106 9.447 8.851 8.313 7.824 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730 4.536 43 12.166 11.274 10477 9.763 9.122 8.544 8.022 7.549 7.120 6.729 6.373 6.047 5.749 5475 5.222 4.990 4.775 4.576 43 12.659 11.690 10 828 10.059 9.322 8.756 8.201 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.8124608 44 13.134 12.085 11.158 10.336 9.604 8.950 8.365 6.550 6.198 5.877 5.584 5.316 5.070 4843 4:635 44 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7.963 7469 7.025 6.623 6259 5.929 5.628 5353 5.101 4.870 4.657 446 14.029 12 821 11 764 10.836 10.01 9292 8.649 8.075 7.562 7.102 6.687 6.312 5975 5.665 5.384 5.127 4.891 4.675 447 14.451 13.163 12.042 11.061 9.442 8.772 8.176 7.645 7.170 6.743 6:359 6.011 5.696 5410 5149 4909 4690 448 14.857 13.489 12.303 11 272 9:580 8.883 8.266 1.718 7.230 6.792 6.399 6.044 5323 5432 5.167 4925 4.703 4.49 15.247 13.799 12.550 11.469 10.529 9.707 8.985 8.348 7.784 7.283 6835 6434 6073 5.746 5451 5.182 4937 4.713 450 15.622 14.094 12.783 11 654 10.675 9.823 9.077 8.422 7.843 7.330 6.873 6.464 6.097 5.766 5.467 5.195 4.948 4.721 451- 4.344 4.607 4.451 4.303 4163 4.031 3.903 4.659