Question
Brief Exercise 12-26 (Algo) A company purchases an asset that costs... [LO 12-5] A company purchases an asset that costs $44,000. This asset qualifies as
Brief Exercise 12-26 (Algo) A company purchases an asset that costs... [LO 12-5] A company purchases an asset that costs $44,000. This asset qualifies as three-year property under MACRS. The company uses an after-tax discount rate of 9% and faces a 34% income tax rate. (Use Table 1, Table 2 and Exhibit 12.4.)
1. Demonstrate that the PV of the depreciation deductions, when the income tax rate is 34%, is $12,667.
2. Given an after-tax discount rate of 9%, what tax rate would be needed in order for the PV of the depreciation deductions to equal $14960? Use the Goal Seek function of Excel.
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