Engineering Economic Analysis

Xon Corporation invested $ 75,000 in equipment used for research and experimentation, which will yield a profit of $ 25,000 annually. The firm is eligible for a 60% depreciation bonus and the balance will be depreciated by MACRS. Assume that the company will sell the equipment during the third year for $ 15,000.

Determine the depreciation schedule, taxable income, tax amount, and after-tax cash flow considering a tax rate of 21%. Answer parts a through g. to fill in the blanks. You must present evidence of all your computations.

(b) Total depreciation in the first year ______________

c. Cash flow after taxes during the first year __________________ (5 points)

d. Book value at the time of sale______________ and. Amount of loss or recapture _________________

F. Total tax amount in the third year _____________

g. Total cash flow after tax in the third year