Your firm needs a computerized machine tool lathe which costs $53,000 and requir
ID: 2743097 • Letter: Y
Question
Your firm needs a computerized machine tool lathe which costs $53,000 and requires $12,300 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 34 percent and a discount rate of 12 percent.
Calculate the depreciation tax shield for this project in year 3. (Round your answer to 2 decimal places.)
Your firm needs a computerized machine tool lathe which costs $53,000 and requires $12,300 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 34 percent and a discount rate of 12 percent.
Explanation / Answer
Ans: Depreciation in year 3 will be : 14.81%*53000=7849.3,
tax shield will be : 7849.3*34%=2668.762
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.