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A freight company has purchased new trailers for $225,000 and expected to realize a net $120,000 in gross income over operating expenses for each of
A freight company has purchased new trailers for $225,000 and expected to realize a net $120,000 in gross income over operating expenses for each of the next three years. The trailers have a recovery- period of 3 years. Assume an effective tax rate of 35% and an interest rate of 15% per year. Show the advantages of accelerated depreciation by calculating the present worth of taxes for the MACRS method versus the standard SL method Since MACRS takes an additional year to fully depreciate the base value, assume no CBFT beyond year 3, but include any negative tax as a tax saving. Show that the total taxes are the same for both methods
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