The firm is in the 30% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB depreciation rate is 50% (i.e., 2 x 25% ). In year four, record depreciation expense as the net book value (NBV) of the asset at the start of the year. (Round discount factor to 3 decimal places and other answers to the nearest whole dollar amount. Negative amounts should be indicated by a minus sign.) Year 0 1 2 3 4 Pre-Tax Cash Inflows $ (60,000) 32,000✔ 32,000 32,000 32,000 Depreciation Taxable Expense Income S S 0 30,000 2,000 15,000✔ 17,000✔ 7,500✔ 24,500 7,500✔ 24,500 Income Taxes 0$ 0 600✔ 5,100 7,350 7,350 After-tax Net Cash Inflow S (60,000) ✔ 31,400 26,900 24,650 24,650 Net present value (NPV) = Discount Factor 0.000 S 0.909 X 0.826 X 0.751 X 0.683 S Present Values (60,000) (60,000) Show less

The firm is in the 30% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB depreciation rate is 50% (i.e., 2 x 25% ). In year four, record depreciation expense as the net book value (NBV) of the asset at the start of the year. (Round discount factor to 3 decimal places and other answers to the nearest whole dollar amount. Negative amounts should be indicated by a minus sign.) Year 0 1 2 3 4 Pre-Tax Cash Inflows $ (60,000) 32,000✔ 32,000 32,000 32,000 Depreciation Taxable Expense Income S S 0 30,000 2,000 15,000✔ 17,000✔ 7,500✔ 24,500 7,500✔ 24,500 Income Taxes 0$ 0 600✔ 5,100 7,350 7,350 After-tax Net Cash Inflow S (60,000) ✔ 31,400 26,900 24,650 24,650 Net present value (NPV) = Discount Factor 0.000 S 0.909 X 0.826 X 0.751 X 0.683 S Present Values (60,000) (60,000) Show less

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.2AP

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