1) Freddy purchased $500,000 worth of 5-year equipment for use in his business. What is the present value of the savings under bonus depreciation (compared to MACRS depreciation)? Freddys marginal tax rate in all years is 40 percent and his cost of capital is estimated to be 10 percent.

How would Freddy analyze whether this is a wise investment?

2) Eddie inherited an individual retirement account worth $225,000 in 2020. Under the Secure Act that was passed in 2019, Eddie will need to withdraw the entire balance within 10 years of this inheritance. How much is Eddies basis in the account? How much income does Eddie recognize if he withdraws the entire $300,000 balance in 2030?