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Mr
Mr. Primo Uno is considering to purchase a machine worth P80,000. The estimated useful of 5 years with no residual value. It is expected to generate a net income before taxes of P40,000 a year with income tax rate of 30%. What is the annual cash return? 28,000 44,000 56,000 None of the above
Expert Solution
| Computation of Annual Cash Return: | ||
| Particulars | Amount | |
| Net Income before Taxes | 40,000 | |
| Less: Taxes @30% | 12000 | =40000*30% |
| Net Income after Taxes | 28,000 | |
| Add: Depreciation | 16000 | =80000/5 |
| Annual Cash Return | 44,000 | |
So, the correct option is 2nd "44,000".
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