Ch 10 B1_Correct

Ch 10 B1_Correct - Capitalizing: The depreciation charge is...

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Chapter 10 Problem Set B B1. Expensing: Reduces the tax liability by $9,000 x .38 = $3,420 Capitalizing: The depreciation charge is $9,000 / 3 = $3,000 per year for 3 years, which reduces the tax liability by $3,000 x 0.38 = $1,140 per year for 3 years. CALC: n = 3 r = 1.12 PV = ? PMT = $1140 FV = 0 PV = -$2,738.09 Difference = $3,420 - $2,738.09 = $681.91 Correction: B1. Expensing: Reduces the tax liability by $9,000 x .38 = $3,420
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Unformatted text preview: Capitalizing: The depreciation charge is $9,000 / 3 = $3,000 per year for 3 years, which reduces the tax liability by $3,000 x 0.38 = $1,140 per year for 3 years. CALC: n = 3 r = 12% PV = ? PMT = $1140 FV = 0 PV = -$2,738.09 Difference = $3,420 - $2,738.09 = $681.91 Note: the textbook solution used 1.12 but the r should be 12%....
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This note was uploaded on 09/18/2011 for the course FIN 303 taught by Professor Bernile during the Spring '11 term at University of Miami.

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