The ABC company is considering purchasing a machine that costs $280,000 and expected to yield $200,000 per year before taxes. The company has to borrow $80,000 which have to be repaid in two years at...


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The ABC company is considering purchasing a machine that costs $280,000 and expected to<br>yield $200,000 per year before taxes. The company has to borrow $80,000 which have to be<br>repaid in two years at į=10%. The cost of operating and maintaining the machine is $40,000 per<br>year. The machine will be needed for two years and can be sold at the end of the second year<br>for $120,000. For depreciation purposes the straight-line depreciation method with no half-<br>year convention applies. Find the missing values in the following tables in order to determine if<br>this was a good investment at MARR of 14%. The company's income tax is 40%. Your decision<br>should be based on the PW criterion.<br>INCOME STATEMENT<br>End of Year:<br>1<br>2<br>Revenue:<br>200,000<br>200,000<br>Expenses<br>Operating Costs:<br>Depreciation:<br>Debt Interest<br>40,000<br>40,000<br>?<br>---<br>?<br>4191<br>---<br>Taxable Income:<br>75809<br>---<br>Таx: (40%)<br>28800<br>30324<br>Net Income:<br>43200<br>?<br>CASH FLOW STATEMENT<br>End of Year<br>1<br>2<br>Operating Activities:<br>Net Income:<br>43200<br>Depreciation:<br>80000<br>80000<br>Investment Activities:<br>Machine:<br>- 280,000<br>Salvage Value:<br>120,000<br>Gains Tax:<br>Financing Activities:<br>Borrowed Money:<br>80,000<br>Principal Repayment:<br>?<br>41905<br>Net Cash Flow:<br>?<br>85104<br>?<br>Present Worth =<br>Decision:<br>?<br>

Extracted text: The ABC company is considering purchasing a machine that costs $280,000 and expected to yield $200,000 per year before taxes. The company has to borrow $80,000 which have to be repaid in two years at į=10%. The cost of operating and maintaining the machine is $40,000 per year. The machine will be needed for two years and can be sold at the end of the second year for $120,000. For depreciation purposes the straight-line depreciation method with no half- year convention applies. Find the missing values in the following tables in order to determine if this was a good investment at MARR of 14%. The company's income tax is 40%. Your decision should be based on the PW criterion. INCOME STATEMENT End of Year: 1 2 Revenue: 200,000 200,000 Expenses Operating Costs: Depreciation: Debt Interest 40,000 40,000 ? --- ? 4191 --- Taxable Income: 75809 --- Таx: (40%) 28800 30324 Net Income: 43200 ? CASH FLOW STATEMENT End of Year 1 2 Operating Activities: Net Income: 43200 Depreciation: 80000 80000 Investment Activities: Machine: - 280,000 Salvage Value: 120,000 Gains Tax: Financing Activities: Borrowed Money: 80,000 Principal Repayment: ? 41905 Net Cash Flow: ? 85104 ? Present Worth = Decision: ?

Jun 03, 2022
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