A company purchases an industrial laser for $123,000. The device has a useful life of 4 years and a salvage value (market value) at the end of those four years of $50,000. The before-tax cash flow is estimated to be $95,000 per year. a. You, of course, suggested applying the 3-year MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of 26%, determine the depreciation schedule and the after tax cash flow. b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $75,000 in year two (consider year two to be the "year 2" row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year? how do you solve for part a for ATCF in year 4. how do you solve part b. Thank you
A company purchases an industrial laser for $123,000. The device has a useful life of 4 years and a salvage value (market value) at the end of those four years of $50,000. The before-tax cash flow is estimated to be $95,000 per year. a. You, of course, suggested applying the 3-year MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of 26%, determine the depreciation schedule and the after tax cash flow. b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for $75,000 in year two (consider year two to be the "year 2" row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year? how do you solve for part a for ATCF in year 4. how do you solve part b. Thank you
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 18E
Related questions
Question
A company purchases an industrial laser for
$123,000.
The device has a useful life of 4 years and a salvage value (market value) at the end of those four years of
$50,000.
The before-tax cash flow is estimated to be
$95,000
per year.a. You, of course, suggested applying the 3-year MACRS (GDS) method instead of the straight-line method. Given an effective tax rate of
depreciation schedule and the after tax cash flow.
26%,
determine the b. Based on the MACRS depreciation schedule for this asset, if the industrial laser was sold for
$75,000
in year two (consider year two to be the "year 2" row in the table in Part (a), what will be the amount of gain (depreciation recapture) or loss on the disposal of the asset at the end of this year?how do you solve for part a for ATCF in year 4. how do you solve part b. Thank you
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 4 images
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning