An air purifier for use in manufacturing semiconductors is placed in service with a first cost of $50,000. It will be used for 8 years, have an annual gross income less operating expenses of $14,000 and will have no salvage value. Corporate income-tax rate is 25%. a. Determine the after-tax cash flows for years 0–8 if depreciation allowances are $10,000, $16,000, $9,600, $5,760, $5,760, $2,880, $0, and $0 during the 8 years (MACRS-GDS 5-year property class). b. Determine the after-tax cash flows for years 0–8 if depreciation allowances are $10,000 for years 1–5 and $0 in years 6–8 (SLN depreciation over only the first 5 years).
An air purifier for use in manufacturing semiconductors is placed in service
with a first cost of $50,000. It will be used for 8 years, have an annual gross income less
operating expenses of $14,000 and will have no salvage value. Corporate income-tax rate
is 25%.
a. Determine the after-tax cash flows for years 0–8 if
$10,000, $16,000, $9,600, $5,760, $5,760, $2,880, $0, and $0 during the 8 years
(MACRS-GDS 5-year property class).
b. Determine the after-tax cash flows for years 0–8 if depreciation allowances are
$10,000 for years 1–5 and $0 in years 6–8 (SLN depreciation over only the first 5
years).
Given:
Life = 8 Years
Income less expenses = $14,000
Tax rate = 25%
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