Question
Carlos Bakery is looking to purchase a new oven. Capital and installation costs are $750,000. Carlos himself wishes to depreciate this expense in a straight-line
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Carlos Bakery is looking to purchase a new oven. Capital and installation costs are $750,000. Carlos himself wishes to depreciate this expense in a straight-line fashion over 4 years but you suggest that using a 4-year MACRS schedule (33.33% in year 1, 44.45% in year 2, 14.81% in year 3, and 7.41% in year 4). If the bakerys marginal tax rate is 20%, what is the NPV of choosing the MACRS schedule over a straight-line schedule if the discount rate is 3%?
Multiple choice options: $1,574
$1,889
$1,093
$2,267
$1,312
Carlos Bakery is looking to purchase a new oven. Capital and installation costs are $750,000. Carlos himself wishes to depreciate this expense in a straight-line fashion over 4 years but you suggest that using a 4-year MACRS schedule (33.33% in year 1, 44.45% in year 2, 14.81% in year 3, and 7.41% in year 4). If the bakerys marginal tax rate is 20%, what is the NPV of choosing the MACRS schedule over a straight-line schedule if the discount rate is 3%?
Multiple choice options:| $1,574 | ||
| $1,889 | ||
| $1,093 | ||
| $2,267 | ||
| $1,312 |
Please show work written out!!
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Financial Accounting
Authors: Robert Libby, Patricia Libby, Frank Hodge
9th edition
290-1259222138, 1259222136, 978-1259222139
