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Value of Accelerated Depreciation: Sum-of-Years’-Digits (SYD) and Double-DecliningBalance (DDB) Methods Freedom Corporation acquired a fixed asset for $100,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rateof 8% and an income tax rate of 40%.Required1. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resultingfrom calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line(SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. 2. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than thestraight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. 3. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resultingfrom using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset.Use the half-year convention

Value of Accelerated Depreciation: Sum-of-Years’-Digits (SYD) and Double-DecliningBalance (DDB) Methods Freedom Corporation acquired a fixed asset for $100,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rateof 8% and an income tax rate of 40%.Required1. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resultingfrom calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line(SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges. 2. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than thestraight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges. 3. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resultingfrom using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset.Use the half-year convention

Essentials Of Investments
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
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Value of Accelerated Depreciation: Sum-of-Years’-Digits (SYD) and Double-DecliningBalance (DDB) Methods Freedom Corporation acquired a fixed asset for $100,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate
of 8% and an income tax rate of 40%.
Required
1. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resulting
from calculating depreciation using the sum-of-the-years’-digits (SYD) method rather than the straight-line
(SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges.
2. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the
straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges.
3. What is the incremental present value (rounded to the nearest whole dollar) of the tax benefits resulting
from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset.
Use the half-year convention

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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