An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and money is worth 10% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes?
An asset with a first cost of $9000 is depreciated using 5-year MACRS recovery. The CFBT is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and money is worth 10% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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An asset with a first cost of $9000 is
using 5-year MACRS recovery. The CFBT is
estimated at $10,000 for the first 4 years and $5000
thereafter as long as the asset is retained. The
effective tax rate is 40%, and money is worth 10%
per year. In present worth dollars, how much of the
cash flow generated by the asset over its recovery
period is lost to taxes?
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