Updated class practice problem to include state tax and proper consideration of asset disposal (1/2 depreciation and need BV to determine recapture or loss) GIVENS: Initial Cost $150,000 Annual net saving $50,000 state Useful life 6 years federal 6.50% 21.0% Salvage value $30,000 tax rate BTCF-D TI tax rate BTCF-Income Tax Year Taxable BTCF MACRS Depreciation Income Income Tax ATCF 0 ($150,000) ($150,000) 1 50,000 20% ($30,000) $20,000 $4,618 45,382 2 50,000 32% ($48,000) $2,000 $462 49,538 3 50,000 19.20% ($28,800) $21,200 $4,895 45,105 4 50,000 11.52% ($17,280) $32,720 $7,555 42,445 5 50,000 11.52% ($17,280) $32,720 $7,555 42,445 6 50,000 2.88% ($4,320) $45,680 $10,548 63,523 indudes 6 and disposal disposal 30,000 BV= $4,320 $25,680 $5,930 recapture ROR Question 1 What is the ATCF ROR when state taxes and asset disposal are properly considered?
Updated class practice problem to include state tax and proper consideration of asset disposal (1/2 depreciation and need BV to determine recapture or loss) GIVENS: Initial Cost $150,000 Annual net saving $50,000 state Useful life 6 years federal 6.50% 21.0% Salvage value $30,000 tax rate BTCF-D TI tax rate BTCF-Income Tax Year Taxable BTCF MACRS Depreciation Income Income Tax ATCF 0 ($150,000) ($150,000) 1 50,000 20% ($30,000) $20,000 $4,618 45,382 2 50,000 32% ($48,000) $2,000 $462 49,538 3 50,000 19.20% ($28,800) $21,200 $4,895 45,105 4 50,000 11.52% ($17,280) $32,720 $7,555 42,445 5 50,000 11.52% ($17,280) $32,720 $7,555 42,445 6 50,000 2.88% ($4,320) $45,680 $10,548 63,523 indudes 6 and disposal disposal 30,000 BV= $4,320 $25,680 $5,930 recapture ROR Question 1 What is the ATCF ROR when state taxes and asset disposal are properly considered?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Updated class practice problem to include state tax and proper
consideration of asset disposal (1/2 depreciation and need BV to
determine recapture or loss)
GIVENS:
Initial Cost $150,000
Annual net saving
$50,000
state
Useful life
6
years
federal
6.50%
21.0%
Salvage value $30,000
tax rate
BTCF-D
TI tax rate
BTCF-Income Tax
Year
Taxable
BTCF MACRS Depreciation
Income
Income
Tax
ATCF
0
($150,000)
($150,000)
1
50,000
20%
($30,000) $20,000
$4,618
45,382
2
50,000
32%
($48,000) $2,000
$462
49,538
3
50,000
19.20%
($28,800) $21,200
$4,895
45,105
4
50,000
11.52%
($17,280) $32,720
$7,555
42,445
5
50,000
11.52%
($17,280) $32,720
$7,555
42,445
6
50,000
2.88%
($4,320)
$45,680
$10,548
63,523
indudes 6 and disposal
disposal
30,000
BV=
$4,320
$25,680
$5,930
recapture
ROR
Question 1
What is the ATCF ROR when state taxes and asset disposal are properly
considered?
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