Chevron Phillips (CP) has put into place new laboratory equipment for the production of chemicals; the cost is $1,800,000 installed. CP borrows 45 percent of all capital needed, and the borrowing rate is 12.5 percent. In the first year, 25 percent of the principal borrowed will be paid back. The throughput rate for in-process test samples has increased the capacity of the lab, saving a net of $X per year. In this first year, depreciation is $360,000 and taxable income is $328,000. What is the gross income or annual savings $X? b. Determine the income tax for the first year assuming a marginal tax rate of 40 percent. c. What is the after-tax cash flow for the first year? a.
Chevron Phillips (CP) has put into place new laboratory equipment for the production of chemicals; the cost is $1,800,000 installed. CP borrows 45 percent of all capital needed, and the borrowing rate is 12.5 percent. In the first year, 25 percent of the principal borrowed will be paid back. The throughput rate for in-process test samples has increased the capacity of the lab, saving a net of $X per year. In this first year, depreciation is $360,000 and taxable income is $328,000. What is the gross income or annual savings $X? b. Determine the income tax for the first year assuming a marginal tax rate of 40 percent. c. What is the after-tax cash flow for the first year? a.
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter19: Lease Financing
Section: Chapter Questions
Problem 7P
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