Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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2. A firm purchased a machine with a life of four years. Depreciating the machine using straight-line depreciation over the four years yields an NPV = -$10. The initial investment was $1000, cost of capital = 15%, and tax rate = 34%. If the firm is allowed to
Transcribed Image Text:The table outlines the Modified Accelerated Cost Recovery System (MACRS) depreciation rates for various asset classes over different time periods: 3-year, 5-year, 7-year, 10-year, 15-year, and 20-year. The MACRS system is used for tax purposes in the United States and allows for the accelerated depreciation of property.
### MACRS Depreciation Rates
| Year | 3-year | 5-year | 7-year | 10-year | 15-year | 20-year |
|------|--------|--------|--------|---------|---------|---------|
| 1 | 33.33 | 20 | 14.29 | 10 | 5 | 3.75 |
| 2 | 44.45 | 32 | 24.49 | 18 | 9.5 | 7.22 |
| 3 | 14.81 | 19.2 | 17.49 | 14.4 | 8.55 | 6.68 |
| 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.7 | 6.18 |
| 5 | | 11.52 | 8.93 | 9.22 | 6.93 | 5.71 |
| 6 | | 5.76 | 8.92 | 7.37 | 6.23 | 5.29 |
| 7 | | | 8.93 | 6.55 | 5.9 | 4.89 |
| 8 | | | 4.46 | 6.55 | 5.9 | 4.52 |
| 9 | | | | 6.56 | 5.91 | 4.46 |
| 10 | | | | 6.55 | 5.9 | 4.46 |
| 11 | | | | 3.28 | 5.91 | 4.
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