After tax book value book 15 15 example depreciation

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ment for $100,000 and it You costs $10,000 to have it delivered and installed. Based on past information, you believe that you can sell the equipment for $17,000 when you are done with it in 6 years. The company’s marginal tax rate is 40%. What is the depreciation expense each year and the afterdepreciation tax salvage in year 6 for each of the following tax situations? situations? 16 16 Example: Straight-line Example: Depreciation Depreciation Suppose the appropriate depreciation schedule Suppose is straight-line is D = (110,000 – 17,000) / 6 = 15,500 every year for 6 (110,000 years years BV in year 6 = 110,000 – 6(15,500) = 17,000 After-tax salvage = 17,000 - .4(17,000 – 17,000) = After-tax 17,000 17,000 17 17 Example: Three-year MACRS Year MACRS MACRS percent percent D 1 .3333 .3333(110,000) = .3333(110,000) 36,663 36,663 2 .4444 .4444(110,000) = .4444(110,000) 48,884 48,884 3 .1482 .1482(110,000) = .1482(110,000) 16,302 16,302 4 .0741 .0741(110,000) = .0741(110,000) 8,151 8,151 BV in...
View Full Document

This document was uploaded on 03/01/2014 for the course FINANCE 250 at Indiana.

Ask a homework question - tutors are online