A firm purchases a machine for $2,000,000 which has a class life of 3 years...
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Accounting
A firm purchases a machine for $2,000,000 which has a class life of 3 years MACRS. The firms cost of capital is 12 percent. When calculating operating cash flows, what is the present value of the tax benefits from depreciation, when the tax rate is 34%?
How did they calculate the Present value at 12%?
D*T Depreciable MACRS basis percent 1 33.33% Annual Tax Depreciation Rate Expense 666,600 .34 889,000 296,200 .34 2,000,000 2,000,000 2,000,000 2 Present Value at 12% 202,361 240,960 71,682 $515,003 44.45 226,644 302,260 100,708 .34 3 14.81 Total
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