Question

5oYD DEPRECIATION A firm has invested & Goiono in machinery with a 5 year useful life. The machinery will have no sallayd llalue, as the lost to remolle it will equal its scrop value. The uniform annual benefits from the mach linery are $15,000. For a combined 45 % income tax rate, and sum of years digits the after depreciation, compute of tax rate l I return

Answer 1

Solution :-

Therefore after tax rate of return = 4.08%

B C D E F G H I J K A 1 Solution :- 27 3 Year Cost $60,000 $60,000 $60,000 $60,000 $60,000 Dep Charge 1/15 2/15 3/15 4/15 5/15 Depreciation 4,000 8,000 12,000 16,000 20.000 60,000 9 15 10 11 1 2 3 4 5 ($60,000) 12 Year 13 Initial Cost 14 Annual Benefit 15 Less :- Dep 16 Before tax Income 17 Less :- Tax Saving @ 45% 18 After tax Income 19 Add :- Dep 20 21 Net Cash Flows $15,000 $4.000 $11,000 $4,950 $6,050 $4,000 $15,000 $8,000 $7,000 $3,150 $3,850 $8,000 $15,000 $12,000 $3,000 $1,350 $1,650 $12,000 $15,000 $16,000 ($1,000) ($450) ($550) $16,000 $15,000 $20,000 ($5,000) ($2,250) ($2,750) $20,000 ($60,000) $10,050 $11,850 $13,650 $15,450 $17,250 22 = 4.08% 23 After tax rate of return 24 25 Formula = IRR(D21:121)

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