me tet 11629 Falsh A Mutlag Atems1 Question 15 4 points a Th

me tet 1:16:29 Falsh A Mutlag: Atems1 Question 15 (4 points) a The president of Real Time, Inc. is considering the acquisition of a new computer. It costs $49000, and falls into the MACRS 3-year class,. Its purchase would require an increase in net working capital of $2000. It would increase the firm\'s before-tax revenues by $19000 per year, but would also increase operating costs by $ 7000 per year. The computer is expected to be used for 3 yvears and then to bie sold for $18000. The hrm\'s marginal tax rate is 40 percent and the project\'s cost of capital is 14 percent. MACRS Recovery Allowances Class Life of Investment Year 3-Year 5-Year 7-Year 10-Year 1 33 20 14 10 45 32 25 18 15 19 17 14 7 12 13 12 11 9 10 The depreciation tax shield in Year 2 will be: Your Answer: Answer units Save DELL

Solution

Answer:

MACRS 3 year depreciation schedule

Year 1 49000 x 33% = 1670

Year 2 49000 x 45% = 22050

Depreciation Tax shield in year 2 22050 x 40% = $8820