Can you please help provide the working and way to get these answers. Thank you
ID: 2403951 • Letter: C
Question
Can you please help provide the working and way to get these answers. Thank you
Question 44. The Sherry Company Ltd is considering the purchase of equipment with a cost of $150,000. The equipment will have a 10-year useful life and depreciation is on the straight-line basis. Management predicts that revenue will be $170,000 each year and operating expenses $110,000 each year. If the income tax rate is 30%, what is the accounting rate of return? SC A. 30.096. B. 28.0%. C. 25.7%. D*. 18.0%. E. 16.0%. 78 Question 45. The Sherry Company Ltd is considering the purchase of equipment with a cost of $150,000. The equipment will have a 10-year useful life and depreciation is on the straight-line basis. Management predicts that revenue will be $170,000 each year and operating expenses $110,000 each year. Assume the revenues and operating expenses were projected on a cash basis. what is the after-tax payback period if the tax rate remains at 30%? A. 3.03 years. B. 3.57 years. C. 2.50 years. D. 4.00 years. E 2.00 years. 20Explanation / Answer
Answer - Q44 Accounting rate of return = Net Income per year / Initial Investment Calculation of Net Income per year Revenue $170,000 Less : Operating Expenses $110,000 Operating profit $60,000 Less : Tax @ 30% $18,000 Net Income $42,000 Accounting rate of return = $42,000 / $1,50,000 = 28% The answer is Option B. Answer - Q45 Calculation of after tax operating cash flow per year Revenue $170,000.00 Less : Cash operating expenses $110,000.00 Operating Cash flow per year $60,000.00 After tax pay back period = Initial Investment / Operating cash flow per year After tax pay back period = $150000 / $60000 = 2.50 years The answer is Option C.