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Note: Depreciable Life is 3 years so MACRS should be done for a 3 year...

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Accounting

imageNote: Depreciable Life is 3 years so MACRS should be done for a 3 year property not 7.

A large profitable machine shop is planning to purchase special tools for fabricated metal products at $30,000. The tools are estimated to last for 7 years (NOT depreciable life, find depreciable life from table 11-2) and provide a benefit of $6000 per year. The maintenance costs each are $500. The salvage value of the tools is estimated to be $4000 at the end of 7 years. The firm pays 34% income tax. The firm uses MACRS depreciation schedule and plans to benefit most out of the depreciation schedule. Determine if this is a worthwhile investment assuming an MARR of 12%

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