A company purchases an asset that costs $10,000. This asset qualifies as 3-year property under MACRS. The company uses an after-tax discount rate of 12% and faces a 40% income tax rate. (Use Table 1, Table 2 and Exhibit 12.4.) Year MACRS % Depreciation Deduction Tax Savings PV Factor Present Values 1 33.33% 3,333.00 1,333.20 0.893 1,190.55 2 44.45% 4,445.00 1,778.00 0.797 1,417.07 3 14.81% 1,481.00 592.40 0.712 421.79 4 7.41% 741.00 296.40 0.636 188.51 100% 10,000.00 4,000.00 3,217.91 2. Given an after-tax discount rate of 12%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,000?
A company purchases an asset that costs $10,000. This asset qualifies as 3-year property under MACRS. The company uses an after-tax discount rate of 12% and faces a 40% income tax rate. (Use Table 1, Table 2 and Exhibit 12.4.) Year MACRS % Depreciation Deduction Tax Savings PV Factor Present Values 1 33.33% 3,333.00 1,333.20 0.893 1,190.55 2 44.45% 4,445.00 1,778.00 0.797 1,417.07 3 14.81% 1,481.00 592.40 0.712 421.79 4 7.41% 741.00 296.40 0.636 188.51 100% 10,000.00 4,000.00 3,217.91 2. Given an after-tax discount rate of 12%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,000?
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the...
Related questions
Question
A company purchases an asset that costs $10,000. This asset qualifies as 3-year property under MACRS. The company uses an after-tax discount rate of 12% and faces a 40% income tax rate. (Use Table 1, Table 2 and Exhibit 12.4.)
Year |
MACRS % |
Deduction |
Tax Savings |
PV Factor |
Present Values |
1 |
33.33% |
3,333.00 |
1,333.20 |
0.893 |
1,190.55 |
2 |
44.45% |
4,445.00 |
1,778.00 |
0.797 |
1,417.07 |
3 |
14.81% |
1,481.00 |
592.40 |
0.712 |
421.79 |
4 |
7.41% |
741.00 |
296.40 |
0.636 |
188.51 |
100% |
10,000.00 |
4,000.00 |
3,217.91 |
2. Given an after-tax discount rate of 12%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,000?
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College