problem 4-9.docx

Adinda Dewi Putri1206228733

Problem 4-9Known from the case:

Total cost = $1,6 billion Based on assumption that construction is completed and the facility is opened for

business by Jan 1, Year 1 Annual income before depreciation and taxes:

o Year 1 = $50 milliono Year 2 = $70 milliono Year 3 = $75 million

Tax rate = 25%Questions: Return on Assets (RoA) for Year 1, Year 2, and Year 3, if the useful life:

a) 25 yearsAnswer:

Depreciation/year = $1,6 billion25 years

=$64million

Year 1Annual income $50 millionDepreciation $(64 million)_____________________________ -EBT $(14 million)Tax (25%) $(3,5 million)_____________________________ -Net Income (Loss) $(10,5 million)

Year 2Annual income $70 millionDepreciation $(64 million)_____________________________ -EBT $6 millionTax (25%) $(1,5 million)_____________________________ -Net Income (Loss) $4,5 million

Year 3Annual income $75 millionDepreciation $(64 million)_____________________________ -EBT $11 millionTax (25%) $(2,75 million)_____________________________ -Net Income (Loss) $8,25 million

Net Assets:Year 1 = $1,6 billion - $64 million = $1,536 millionYear 2 = $1,536 million - $64 million = $1,472 millionYear 3 = $1,472 million - $64 million = $1,408 million


Return on Assets¿Net Income

Total Net Assets

Return on Assets:

Year 1 = $ (10,5million )$1,536million

= - 0,683594%

Year 2 = $4,5million$1,472million

=0,305707%

Year 3 = $8,25million$1,408million

=0,585938%

b) 15 yearsAnswer:


=$106,67million

Year 1Annual income $50millionDepreciation $(106,67 million)_____________________________ -EBT $(56,67 million)Tax (25%) $(14,1675 million)_____________________________ -Net Income (Loss) $(42,5025 million)

Year 2Annual income $70 millionDepreciation $(106,67 million)_____________________________ -EBT $(36,67 million)Tax (25%) $(9,1675 million)_____________________________ -Net Income (Loss) $(27,5025 million)

Year 3Annual income $75 millionDepreciation $(106,67 million)_____________________________ -EBT $(31,67 million)Tax (25%) $(7,9175 million)_____________________________ -Net Income (Loss) $(23,7525 million)

Net Assets:Year 1 = $1,6 billion - $106,67 million = $1.493,33 million


Year 2 = $1.493,33 million - $106,67 million = $1.386,66 millionYear 3 = $1.386,66 million - $106,67 million = $1.279,99 million


Total Net Assets

Return on Assets:

Year 1 = $ (42,5025million )$ 1.493,33million

= 2,846156%

Year 2 = $ (27,5025million)$1.386,66million

=−1,983363%

Year 3 = $ (23,7525million)$1.279,99million

=−1,855679%

c) 10 yearsAnswer:


=$160million

Year 1Annual income $50millionDepreciation $(160 million)_____________________________ -EBT $(110 million)Tax (25%) $(27,5 million)_____________________________ -Net Income (Loss) $(82,5 million)




Net Assets:Year 1 = $1,6 billion - $160 million = $1.440 millionYear 2 = $1.440 million - $160 million = $1.280 millionYear 3 = $1.280 million - $160 million = $1.120 million


Total Net Assets

Return on Assets:

Year 1 = $ (82,5million)$1.440million

= 5,729167%


=−5,273438%


=−5,691964%

d) 1 yearAnswer:

Depreciation/year = $1,6 billion1 year

=$1,6billion=$1.600million

Year 1Annual income $50 millionDepreciation $(1.600 million)_____________________________ -EBT $(1.550 million)Tax (25%) $(387,5 million)_____________________________ -Net Income (Loss) $(1162,5 million)

Year 2Annual income $70 millionDepreciation $0_____________________________ -EBT $70 millionTax (25%) $17,5 million_____________________________ -Net Income (Loss) $52,5 million

Year 3Annual income $75 millionDepreciation $0_____________________________ -EBT $75 million


Tax (25%) $(18,75 million)_____________________________ -Net Income (Loss) $56,25 million

Net Assets:Year 1 = $1,6 billion - $1,6 billion = $0Year 2 = $0 - $0 = $0Year 3 = $0 - $0 = $0


Total Net Assets

Return on Assets:

Year 1 = $ 0$ 0

=

Year 2 = $ 0$ 0

=¿

Year 3 = $ 0$ 0

=¿

problem 4-9.docx

Documents