Question
Answer the following Questions MACRS recovery allowance per year Class of Investment Ownership year 3-year 5-year 7-year 1 33.33% 20.00% 14.29% 2 44.45% 32.00% 24.49%
Answer the following Questions
MACRS recovery allowance per year |
| ||
|
| ||
| Class of Investment | ||
Ownership year | 3-year | 5-year | 7-year |
1 | 33.33% | 20.00% | 14.29% |
2 | 44.45% | 32.00% | 24.49% |
3 | 14.81% | 19.20% | 17.49% |
4 | 7.41% | 11.52% | 12.49% |
5 |
| 11.52% | 8.93% |
6 |
| 5.76% | 8.92% |
7 |
|
| 8.93% |
8 |
|
| 4.46% |
Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The equipment for the project is classified as 3-year life using the MACRS depreciation, after which it would be worth nothing and thus it would have a zero salvage value. No new working capital would be required, and revenues and other operating costs would be constant over the projects 4-year life.
WACC | 10.0% |
Initial investment | $165,000 |
Sales revenues, each year | $123,000 |
Business expenses | $25,000 |
Tax rate | 35% |
Question 1. (Show all work for credit)
Calculate the depreciation amount for each year of the life of the equipment.\
Question 2. (Show all work for credit)
Calculate the projects NPV.
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