A cоmpаny plаns tо spend $3,700,000 оn equipment. The equipment will be depreciаted using the MACRS method and a 5-year recovery period. The company uses a study period of 6 years for these types of purchases and plans to keep the equipment indefinitely. Gross income is expected to be $900,000 in year 1 and increase by $170,000 each year. Annual operating expenses are expected to be $50,000 in year 1 and increase by $70,000 each year. The company’s combined marginal tax rate is 39%. A portion of the after-tax cash flow analysis is shown below. Year GI OE CFBT Dt TI Taxes CFAT 0 −$3,700,000 1 $807,100 2 $1,041,260 3 $1,240,000 $190,000 (a) $710,400 (b) (c) (d) 4 $867,734 5 $928,734 6 $906,617 Round to nearest dollar. For Year 3, what is the cash flow before taxes, CFBT? $[cb] For Year 3, what is the taxable income, TI? $[ti] For Year 3, what is the amount of taxes, Taxes? $[x] For Year 3, what is the cash flow after taxes, CFAT? $[ca] What is the after-tax Rate of Return over the study period? [ror]% (one decimal) If the company's MARR is 12%, should they invest in this equipment, YES or NO? [in]
A medicаl diаgnоstic lаbоratоry plans to spend $1,900,000 on equipment to provide pathology services. The equipment will be depreciated using the MACRS method and a 5-year recovery period. Gross income is expected to be $750,000 in year 1 and increase by $30,000 each year. Annual operating expenses are expected to be $150,000 in year 1 and increase by $20,000 each year. The company’s combined marginal tax rate is 39%. The company uses a study period of 6 years for these purchases and plans to keep the equipment indefinitely. For Year 2, what is the cash flow before taxes, CFBT2? (nearest dollar) $[cb2] For Year 2, what is the deprecation rate, α2? (four decimals) [a2] For Year 2, what is the depreciation charge, D2? (nearest dollar) $[d2] For Year 2, what is the taxable income, TI2? (nearest dollar) $[ti2] For Year 2, what is the amount of taxes, Taxes2? (nearest dollar) $[x2] For Year 2, what is the cash flow after taxes, CFAT2? (nearest dollar) $[ca2] Refer to the CFAT summary below. Use the CFAT that you calculated in part (f) for year 2. What is the after-tax Rate of Return over the study period? (one decimal) [ror]% Year CFAT,$ 0 −1,900,000 1 514,200 2 CFAT2 from part (f) 3 520,472 4 469,663 5 475,763 6 439,182 h. If their MARR is 14%, should the lab invest in this equipment? (YES or NO) [in]