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In 2020, you purchased a piece of equipment for $125000 . You will use the Straight Line Depreciation method and will use a depreciable salvage
In 2020, you purchased a piece of equipment for $125000. You will use the Straight Line Depreciation method and will use a depreciable salvage value of $6,000. The equipment has a depreciable and useful life of five years. The first-year benefit is $20,000 and increases by $5,000 each year thereafter. You sell the equipment at the end of year 5 for a market value of $15000. You are in the 32% income tax bracket. Ordinary gains/losses are taxed at 18% and capital gains are taxed at 15%.
Answer the following questions:
- What amount of taxes do you owe (or get refunded) on the depreciation recapture (tax on the sale of the equipment)?
- What is the value of the After Tax Cash Flow in year 5?
- What is the After Tax ROR on the investment?
- If you have a MARR of 10% is this a good investment?
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