November 29, 2015

Homework Help: UALR

Posted by jldix on Friday, March 11, 2011 at 11:40pm.

Information about a project Darcy Company is considering is as follows:
Investment $1,000,000
Revenues $700,000
Variable costs $140,000
Fixed out-of-pocket costs $80,000
Cost of capital 12%
Tax rate 40%

The property is considered 5-year property for tax purposes. The company plans to use MACRS and dispose of the property at the end of the sixth year. No salvage value is expected. Assume all cash flows occur at the end of the year. Round amounts to dollars.

The tax savings from depreciation in Year 2 would be

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