The following is governed by an income tax rate of 25% . Depreciation rate is determined using MACRS A company is considering two alternatives Choice 1 : A machine is purchased for 60,000. It is a 5 year property class. It will be used for 10 years after which it will have a salvage value of 15,000. It is mostly grey with a metallic steel cover. The Before Tax Cash Flow will be 80,000 per year. The machine is purchased from Retained Earning cash outright. It has no extra deductions associated with it. Choice 2: A machine is purchased for 65,000. It is a 10 year property class object. It will be used for 12 years with a salvage value of 18,000. It is mostly blue with a white cover. The Before Tax Cash Flow will be 86,000 per year. The machine is purchased from Retained Earnings Cash Outright. It receives an additional allowance for environmental effects of 5000/yr. The allowance is not taxed. and is not included in the 86,00O BTCF. Only one response below is correct Which of the following statements is true in the third year of operation?
The following is governed by an income tax rate of 25% . Depreciation rate is determined using MACRS A company is considering two alternatives Choice 1 : A machine is purchased for 60,000. It is a 5 year property class. It will be used for 10 years after which it will have a salvage value of 15,000. It is mostly grey with a metallic steel cover. The Before Tax Cash Flow will be 80,000 per year. The machine is purchased from Retained Earning cash outright. It has no extra deductions associated with it. Choice 2: A machine is purchased for 65,000. It is a 10 year property class object. It will be used for 12 years with a salvage value of 18,000. It is mostly blue with a white cover. The Before Tax Cash Flow will be 86,000 per year. The machine is purchased from Retained Earnings Cash Outright. It receives an additional allowance for environmental effects of 5000/yr. The allowance is not taxed. and is not included in the 86,00O BTCF. Only one response below is correct Which of the following statements is true in the third year of operation?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 2P
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