Here is the link for Appendix A https://ezto-cf-media.mheducation.com/Media/Conn
ID: 2337542 • Letter: H
Question
Here is the link for Appendix A https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/jones_22e/Jones22e_AppA.pdf
(And a) -33148 b) -31588 are wrong answers)
Hansen Company, a cash basis taxpayer, paid $50,000 for an asset in year 0. Assume it can deduct one-half of the cost in year O and the remainder in year 1. Assume a 21 percent tax rate and 8 percent discount rate. Use Appendix A a. Calculate the net present value of Hansen's after-tax cost of the asset. b. Now assume Hansen borrows the $50,000 needed to purchase the asset. It repays the loan in year 2, with interest of $10,000. Calculate the net present value of Hansen's after-tax cost of the asset under these new facts. Complete this question by entering your answers in the tabs below RequiredA Required B Calculate the net present value of Hansen's after-tax cost of the asset. (Round your intermediate calculations to the nearest whole dollar amount. Negative amount should be indicated by a minus sign.) NPV of after-tax cost Required A Required BExplanation / Answer
a. NPV of After Tax cost of asset
NPV = - Cash Outflow + Cash Inflow as tax savings
NPV = - 50000 + (25000 + 25000/1.08) * 0.21
NPV = - 50000 + (25000 + 23150) * 0.21
NPV = - $39888.50
b. NPV under different situation provided in B
NPV = Present Value of Cash Inflows - Present Value of Cash Outflows
NPV = (25000 + 25000/1.08) * 0.21 - (60000/(1.08)^2)
NPV = $10111.50 - $51420
NPV = -$41308.50