A surface-mount placement (SMP) machine is purchased for $500,000. Over its 10-year life, it produces before-tax cash flows of $108,333.33 and has a salvage value of $50,000. Based on an income-tax rate of 25%, an after-tax required return on investment of 10%, MACRS-GDS depreciation, and bonus depreciation of 50% and 100%, compare the after-tax present worth of the acquisition with that obtained in the absence of bonus depreciation.
A surface-mount placement (SMP) machine is purchased for $500,000. Over its 10-year life, it produces before-tax cash flows of $108,333.33 and has a salvage value of $50,000. Based on an income-tax rate of 25%, an after-tax required return on investment of 10%, MACRS-GDS depreciation, and bonus depreciation of 50% and 100%, compare the after-tax present worth of the acquisition with that obtained in the absence of bonus depreciation.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A surface-mount placement (SMP) machine is purchased for $500,000. Over its 10-year life, it produces before-tax cash flows of $108,333.33 and has a salvage value of $50,000. Based on an income-tax rate of 25%, an after-tax required
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