Question

A subsidiary of General Electric (Voltare Energy) places in service electric generating and transmission equipment at a cost of $4,000,000. The equipment is expected to last for 30 years with a wreck-out salvage value of $250,000. The equipment will increase net income by $500,000 in the first year, increasing by 2.4% each year thereafter. The subsidiary's tax rate is 40% and the after-tax MARR is 9%. There is some concern that the need for this equipment will last only 10 years and need to be sold off for $550,000 at that time. Draw the table that you can use to fill in the calculations for BTCF, DWO, TI, T, ATCF, and MACRS (20-Year property class). What is the Tax for year 3 (T3)? $102,800 $140,620 $128,490 $89,300

can I have fast answer please

Answer 1

For a 20 yr MACRS property, dep rate in yr 3 = 6.677%

Dep in yr 3 = 6.677% * 4000000 = 267080

Revenue in yr 3 = 500000 * (1+0.024)^2 = 524288

Taxable income in yr 3 = 524288 - 267080 = 257208

Tax on income = 0.4 * 257208 = 102883.20 ~ 102800

First option is correct answer