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A machine specialized for use in the manufacture of motor vehicles is purchased for $100,000. The machine is purchased with a $60,000 loan and $40,000
A machine specialized for use in the manufacture of motor vehicles is purchased for $100,000. The machine is purchased with a $60,000 loan and $40,000 of equity. The loan has an interest rate of 10% and is paid off as follows: a payment of $12,000 is made in each of EOY 1 through EOY 4 and then the remaining principal and interest is paid at EOY 5. The revenue minus cost for each of the five years of operation is $30,000. The tax rate is 21%. Complete the table below. Show all of your work. EOY Tax Before Tax and Loan Cash MACRS Deduction Book Value Loan Principal Payment Loan Interest Payment Remainin g Principal Taxable Income After Tax Cash Flow Flow 0 1 2 3 4 5
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