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- 17.7 Rotana Construction, Inc., has operated for the last 21 years in a northern U.S. state where the state income tax on corporate revenue is 6% per year. Rotana pays an average federal tax of 23% and reports taxable income of $7 million. Because of pressing labor cost increases, liability insurance premium increases, and other cost increases, the president wants to move to another state to reduce the total tax burden. The new state may have to be willing to offer tax allowances or an interest-free grant for the first couple of years in order to attract the company. You are an engineer with the company and are asked to do the following. (a) Determine the effective tax rate for Rotana. (b) Estimate the state tax rate that would be necessary to reduce the overall effective tax rate by 10% per year. (c) Determine what the new state would have to do financially for Rotana to move there and to reduce its effective tax rate to 22% per year.In 2015, a firm has receipts of $8 million and expenses (excluding depreciation) of $4 million. Its depreciation for 2015 amounts to $2 million. If the effective income tax rate is 40%, what is this firm’s net operating income after taxes (NOPAT)?When determining the present worth of the after-tax cash flows of an investment purchased using borrowed funds, which of the following are required? I. Principal and interest component for each loan payment II. Tax rate applied to the taxable income generated by the investment III. Depreciation deductions for the investment IV. Before-tax and loan cash flows for the investment V. MARR. a. I, III, IV, and V only b. II, III, IV, and V only c. IV and V only d. All items (I, II, III, IV, and V).
- Hydro Systems Engineering Associates, Inc., provides consulting services to city water authorities. The consulting firm’s contribution-margin ratio is 15 percent, and its annual fixed expenses are $245,000. The firm’s income-tax rate is 30 percent. Required:1. Calculate the firm’s break-even volume of service revenue.2. How much before-tax income must the firm earn to make an after-tax net income of $138,000?3. What level of revenue for consulting services must the firm generate to earn an after-tax net income of $138,000?4. Suppose the firm’s income-tax rate changes to 20 percent. What will happen to the break-even level of consulting service revenue? Calculate the firm’s break-even volume of service revenue. How much before-tax income must the firm earn to make an after-tax net income of $138,000? What level of revenue for consulting services must the firm generate to earn an after-tax net income of $138,000? (Do not round intermediate calculations. Round your final answers to the…A company's second year operations can be summarized as follows: Revenues: $110 000 Expenses (except CCA): $65 000 Its capital asset purchases in the first year totalled $100 000, with none in the second year. With a CCA rate of 20 percent and a tax rate of 55 percent, how much income tax did it pay?Laila’s Surveying Inc. had revenues of $1.5 million in 2016. Expenses totaled $900,000. What was her net profit (or loss) if the tax rate is 38%?
- You are trying to estimate the value of the XYZ Inc. company, as of the end of 2018. The after-tax cashflow from assets (FCFF) for the year ending 2018 is $145 million. The estimated WACC is 10%, What comes closest to the current value of the firm XYZ if the cashflow from assets are expected to grow at a constant rate of 2% in the future? 1849 million 1479 million 2113 million 1813 million 1450 millionnt i Net sales (all credit) Less: Cost of goods sold Gross profits Less: Other operating expenses EBITDA Less: Depreciation and amortization EBIT Less: Interest EBT Less: Taxes Net income Determine the firm's 2021 tax liability. Tax liability Oakdale Fashions, Inc.'s, 2021 income statement is reported below. (Use corporate tax rate of 21 percent for your calculations.) Oakdale Fashions, Inc., Income Statement for 2021 Determine the firm's 2021 net income. Net income $ 660,000 253,000 $ 407,000 128,000 $ 279,000 18,800 $ 260,200 89,500 $ 170,700 $ Saved < Prev K myPay 2 of 12 ww Next aos mefaInvestment-End of Chapter Problem Management at TJX Companies is deciding whether to build a new goods distribution center. The distribution center will cost $60 million to build; the estimated additional first year revenue will be $5 million. The distribution center will last 50 years, with a depreciation rate of 5% per year. The opportunity cost of this investment is predicted to be 7% interest earned. a. What is the present value of the stream of payments resulting from this potential new goods distribution center? Round to the nearest million. $ b. TJX million build the distribution center because the
- Investment - End of Chapter Problem Management at TJX Companies is deciding whether to build a new goods distribution center. The distribution center will cost $60 million to build; the estimated additional first year revenue will be $5 million. The distribution center will last 50 years, with a depreciation rate of 5% per year. The opportunity cost of this investment is predicted to be 7% interest earned. a. What is the present value of the stream of payments resulting from this potential new goods distribution center? Round to the nearest million. $ b. TJX million build the distribution center because the benefit exceeds the cost cost exceeds the benefitProblem 17.047 A division of Midland Oil & Gas has a taxable income (TI) of $9.65 million for a tax year. If the state tax rate averages 7% for all states in which the corporation operates, find the equivalent after-tax rate of return (ROR) required of projects that are justified only if they can demonstrate a before-tax return of 22% per year. Use the table given below to calculate taxes, the average tax rate Te and after-tax ROR. Over 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 But Not over 50,000 75,000 100,000 335,000 10,000,000 15,000,000 18,333,333 If Taxable Income ($) Is: The equivalent after-tax ROR is determined to be Tax Is 15% 7,500 + 25% 13,750 + 34% 22,250 + 39% 113,900 + 34% 3,400,000 + 35% 5,150,000+ 38% 35% %. Of the Amount over 0 50,000 75,000 100,000 335,000 10,000,000 15,000,000 0On May 1,2018, Karina purchased 100 shares of Gold stock at a total cost of $2,000, She received a total of $150 in dividends and sold the stock for $2,280 on May 15, 2019. Karina has a combined state and federal marginal tax rate of 28%. Her tax rate on both long-term capital gains and dividend income is 15%. What is her after-tax holding period return on her investment in Gold stock? 21.50% 23.48% 18.28% 16.28%