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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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