Graded Homework 2 Solution

Graded Homework 2 Solution - Problem 1 Year 0 1 2 3 4 5 Net...

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Problem 1 Year Cashflow Tax Benefit from Depreciation Deduction* Net Cash Flow Discount Factor Net Present Value 0 (75,000) (75,000) 1 (75,000.00) 1 5,250 5,250 0.9524 5,000.00 2 8,400 8,400 0.9070 7,619.05 3 5,040 5,040 0.8638 4,353.74 4 3,024 3,024 0.8227 2,487.85 5 15,000 (714) 14,286 0.7835 11,193.45 Net Present Value (44,345.90) Year Cashflow Tax Benefit from Depreciation Deduction* Net Cash Flow Discount Factor Net Present Value 1 (75,000) 5,250 (69,750) 1.0000 (69,750.00) 2 8,400 8,400 0.9524 8,000.00 3 5,040 5,040 0.9070 4,571.43 4 3,024 3,024 0.8638 2,612.24 5 15,000 (714) 14,286 0.8227 11,753.13 Net Present Value (42,813.20) * The tax benefit is calculated based on the MACRS depreciation deduction for the year times Evergreen’s tax rate of 35%. The tax benefit from the initial year’s depreciation is $5,250 ($75,000 X 20% X 35%). **The tax benefit equals the tax benefit from the depreciation deduction of $1,512(75,000*.1152*.5*.35) less the tax cost from the gain on the sale of 476 [(15,000- 8,640)*.35].
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This note was uploaded on 02/26/2012 for the course ACTG 470 taught by Professor Staff during the Spring '10 term at Oregon.

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Graded Homework 2 Solution - Problem 1 Year 0 1 2 3 4 5 Net...

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