2. Suppose that an asset with a cost basis of $100,000 and an ADS recovery period of five years is being depreciated under the Alternate Depreciation System (ADS) of MACRS, as follows: Year 2 3 4 5 6 Depreciation $10,000 $20,000 S20,000 S20,000 $20,000 $10,000 Deduction If the firm's effective income tax rate remains constant at 30% during this six-year period, what is the PW of after-tax savings resulting from depreciation when MARR = 15% per year (after taxes)? %3D

MATLAB: An Introduction with Applications
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2. Suppose that an asset with a cost basis of $100,000 and an ADS recovery period of five years
is being depreciated under the Alternate Depreciation System (ADS) of MACRS, as follows:
Year
2
3
4
5
6
Depreciation
$10,000
$20,000
S20,000
S20,000
$20,000
$10,000
Deduction
If the firm's effective income tax rate remains constant at 30% during this six-year period, what
is the PW of after-tax savings resulting from depreciation when MARR = 15% per year (after
taxes)?
%3D
Transcribed Image Text:2. Suppose that an asset with a cost basis of $100,000 and an ADS recovery period of five years is being depreciated under the Alternate Depreciation System (ADS) of MACRS, as follows: Year 2 3 4 5 6 Depreciation $10,000 $20,000 S20,000 S20,000 $20,000 $10,000 Deduction If the firm's effective income tax rate remains constant at 30% during this six-year period, what is the PW of after-tax savings resulting from depreciation when MARR = 15% per year (after taxes)? %3D
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