F.Chap10

# After tax book value book 15 15 example depreciation

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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...
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