A new product is being considered by Brooks’ Books, Inc. The after-tax cash flows
at time zero include an outlay for depreciable equipment (I0) of $16M (M = million)
and $2.2M for additional net working capital (ΔW). The project is expected to have
an 8-year life (n=8), and the equipment will be depreciated on a straight-line basis
to a zero-book value (B=0) over 8 years. When the project terminates in eight years,
it is anticipated that the market or salvage value (S) will be $2M and the net working
capital will be released. The cash flows before tax (CFBTt) for the project are
expected to be $5M per year. The cost of capital (r) is 16%, and the relevant tax
rate (T) is 35%. Answer the below questions.
(1) What are the initial costs (CF0)?
(2) What is the after-tax value of the revenues minus expenses for each year
(CFBTt)?
(3) What is the depreciation tax shield per year (DTSt)?
(4) What at the cash flows after tax for each year (
Answers
Answer:
With your knowledge in quality management how can you phrase 'doing it right the first time and better next time' be the leveraged to aid industrializ
ation in the face of the COVID-19
. A and B were in partnership sharing profits and losses in the ratio of 3:1. The Balance Sheet of the old partnership as at 31st March, 2018 stood as
:Liabilities Rs. Assets Rs.Sundry CreditorsCapital Accounts: A 4,00,000 B 2,00,0003,50,0006,00,0009,50,000Cash in hand Book DebtsStockMachinery & FixturesLand & Building40,0002,00,0001,80,0002,00,0003,30,0009,50,000On 1st April, 2018 they admit C as a partner on the following terms:i) That the value of land and buildings to be appreciated by 15 per cent and that of stocks and machinery & fixtures to be reduced by 7 and 5 per cent respectively.ii) That provision for doubtful debts be made at 5 per cent.iii) That Rs. 15,000 be provided for an unforeseen liability.iv) That Rs. 11,000 is to be received as commission, hence to be accounted for.