[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for BEC.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[monikernc]

I have to thank the miles video on cap budgeting for this one.
Annual depreciation will be 15,000
300,000-280,000=20,000 EBITDA
20,000-15,000=5000 EBIT
EBIT5000*(1-.3)=3500, to get EAT
Now add depreciation back to EAT to get CASH flow (depreciation is non-cash, only the tax savings is a cash flow)
3,500+15,000=18,500 is the after tax cash flow
Lay it out in a column and it will make sense
Miles' cap budgeting video on youtube is great.
It is asking for the tax affected cash flows and the initial investment is not tax affected. That just gives you the info you need to calc depreciation.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

It makes sense to think that they mean cash inlows with that wording. But if its after tax, why do we not apply the tax rate to the operating income? Is this what they meant?
20,000 operaring income
– 1,500 depreceation
= 18,500???

[monikernc]

Are you guys doing these questions in becker or ninja mcq? Ninja gives an explanation with the answer. Not as good as miles on these but don't tell jeff i said that.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

That makes sense monikernc. Great explanation.

[monikernc]

Thank miles. I just relabeled the EBITDA, etc, correctly. An hour with miles will save you a lot of aggravation. Here is the link:
https://m.youtube.com/watch?v=bamfpLLBJXs
If this is the one where he does the flashback to pv and goes from wearing a yellow shirt to a blue shirt skip to end of that if you don't need the review on discounting.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[FAR_WARS]

so “expected after-tax cash flows” means only tax affected cash flows? I understood the explanation given (by becker), but they just completely left out the initial investment and I was not sure why. CHECK.

Back to the other question I posted (moore corp):

5,000 SV cash inflow
-2,000 tax from the sale.

Conceptually what is going on here? The $2,000 is tax that we would now have to pay because of a higher NI resulting from a gain on disposal of the asset???

Or am I totally off base?

FAR- 80
BEC- 75
AUD- 78
REG- ?

[Anonymous]

Far wars I think that is exactly what is happening. 2.000 tax for that income from disposal.

[FAR_WARS]

so glad i took FAR first or I would never have understood that.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[monikernc]

Yes $2000 is a cash outflow for taxes paid on the gain when the equipment is sold for SV of $5000 when book value is 0. $5000*.40
If it had been a loss the tax savings would treated as an inflow.

100,000+5000=105,000
105,000*(1-.40)= 63,000

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[payaza2000]

Harvey Co. is evaluating a capital investment proposal for a new machine. The investment proposal shows the following information:

Initial cost $500,000
Life 10 Years
Annual net cash inflows $200,000
Salvage value $100,000
If acquired, the machine will be depreciated using the straight-line method. The payback period for this investment is:

A.
3.25 years.

B.
2.67 years.

Correct C.
2.5 years.

D.
2 years.

The payback period is calculated by dividing the initial investment by the annual cash flow.

Initial investment = $500,000
Annual net cash flows = $200,000 per year
$500,000 ÷ $200,000 per year = 2.5 years
The payback method does not take into account the life of the equipment, its salvage value, or how it will be depreciated.
Question #: 256 Category: 3A2 Financial and Risk Analysis

The Question (just need someone to confirm this) I have is that if the question provided a tax rate, you would include the Depreciation Tax Shield in calculating the payback period? Right?

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[Dojo4lyfe]

When you guys do the MCQ do you do each section individually until you consistently hit 80% before moving on to the next section? Im averaging 90% on corporate governance after 30 questions so i moved on to economics. After 100 questions im only averaging 60%. Should i continue to work this section or move on to the next section and come back to this later?

[monikernc]

Payaza if tax rate is not given you generally ignore info about depreciation because it is noncash. If a tax rate is given then you need to calculate the tax savings and use as an inflow.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[FAR_WARS]

@Dojo. If you haven't scheduled your test, stick with a section until you feel comfortable with it and are scoring well. If you are trying to test by the end of this quarter, you should make a schedule of sections for each day and stick to it.

FAR- 80
BEC- 75
AUD- 78
REG- ?

[monikernc]

Dojo… are you talking about ninja mcq? Corp gov is pretty easy. The rest is challenging. If so, what i do the first pass is custom sessions of new questions by section until i have seen all. Then i start back at beginning and do missed questions section by section until i get them right. That is when i hit review and trending is 100% i pull progress report and start doing sessions for more than one section in a chapter or start hitting weak areas and sessions of trouble questions. From there it is all review and you just keep hitting them building weak areas up and keeping strong areas strong. In review i keep trending at 100 and build my averages. But hey, that's just me

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[monikernc]

This is a long weekend coming up. Lots to do. Have to keep building pace. The 27th is not that far off anymore.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Author]

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