An asset with a first cost of $13,000 is depreciated using the Modified Accelerated Cost recovery System (MACRS) over a 5-year period. The cash flow before taxes (CFBT) is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 33%, and the money is worth 11% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes? The present worth (PW) of CFBT is determined to be $ The present worth (PW) of CFAT is determined to be $ The difference between the two present worth (PW) values is determined to be $

An asset with a first cost of $13,000 is depreciated using the Modified Accelerated Cost recovery System (MACRS) over a 5-year period. The cash flow before taxes (CFBT) is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 33%, and the money is worth 11% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes? The present worth (PW) of CFBT is determined to be $ The present worth (PW) of CFAT is determined to be $ The difference between the two present worth (PW) values is determined to be $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

An asset with a first cost of $13,000 is depreciated using the Modified Accelerated Cost recovery System (MACRS) over a 5-year
period. The cash flow before taxes (CFBT) is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is
retained. The effective tax rate is 33%, and the money is worth 11% per year. In present worth dollars, how much of the cash flow
generated by the asset over its recovery period is lost to taxes?
The present worth (PW) of CFBT is determined to be $
The present worth (PW) of CFAT is determined to be $
The difference between the two present worth (PW) values is determined to be $

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