Question
A corporation with $7million in annual taxable income and no state tax is considering two alternatives: Before-Tax Cash Flow($1000) year Alt 1 Alt 2 0
A corporation with $7million in annual taxable income and no state tax is considering two alternatives:
Before-Tax Cash Flow($1000)
| year | Alt 1 | Alt 2 |
| 0 | -$10000 | -$20000 |
| 1 - 10 | 4500 | 4500 |
| 11 - 20 | 0 | 2500 |
Both alternatives will be depreciated by 40% bonus depreciation taken in year 0 plus 10-year MACRS depreciation. Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum attractive rate of return of 10% after taxes, which alternative should it choose? Solve the problem by:
(a) Present Worth Analysis
(b) Annual Cash Flow Analysis
(c) Rate of Return Analysis
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Personal Finance
Authors: Jeff Madura, Hardeep Singh Gill
3rd Canadian Edition
978-0133035575, 133035573, 978-0133970524, 133970523, 978-0134040042
