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Consider an asset with the cost basis of $500,000, useful life of 5 years and salvage...

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General Management

Consider an asset with the cost basis of $500,000, useful lifeof 5 years and salvage value of 10,000 at the end of its usefullife. This asset generates yearly revenue of $275,000 and itsoperating cost is $55,000 per year. Average inflation rate isestimated to be 4% over the next 5 years.

Calculate tax saving in year 2 due to depreciation; if thedouble declining method is used for depreciation (tax rate is30%).

(Report your answer in dollar amounts without any extracharacter. Answers such as 2Million; 2M; 2,000,000 or $2000000 arenot acceptable)

Answer & Explanation Solved by verified expert
3.7 Ratings (361 Votes)
Given Cost 500000 Useful life 5 yrs Salvage value 10000 Yearly revenue 275000 Operating cost55000yr Inflation rate4 over next 5 years CalculateTax saving year 2tax rate is 30 The double declining    See Answer
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