You consider purchasing a new piece of equipment (7yr MACRS property) for your manufacturing process for $120,000. The equipment has a 6-year useful life and no salvage value. The equipment is expected to generate an additional $40,000 of net income before taxes and depreciation each year by using this upgraded system. The combined federal and state income tax rate= 35%. Annual inflation = 4%. a. Fill in the following table assuming MACRS depreciation rates Year 0 Pretax MACRS Taxable income Depreciation income Tax owed After tax income Inflation adjustment factor Real after tax income
You consider purchasing a new piece of equipment (7yr MACRS property) for your manufacturing process for $120,000. The equipment has a 6-year useful life and no salvage value. The equipment is expected to generate an additional $40,000 of net income before taxes and depreciation each year by using this upgraded system. The combined federal and state income tax rate= 35%. Annual inflation = 4%. a. Fill in the following table assuming MACRS depreciation rates Year 0 Pretax MACRS Taxable income Depreciation income Tax owed After tax income Inflation adjustment factor Real after tax income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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