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In year 0, Jarmex paid $55,000 for an overhaul of a tangible operating asset. Jarmex has a 21 percent marginal tax rate and uses a
In year 0, Jarmex paid $55,000 for an overhaul of a tangible operating asset. Jarmex has a 21 percent marginal tax rate and uses a 7 percent discount rate to compute NPV. Use Appendix A. a. Compute the after-tax cost of the overhaul if Jarmex can deduct the $55,000 payment as a repair in year 0. b. Compute the after-tax cost of the overhaul if Jarmex must capitalize the $55,000 payment to the asset account and can recover it on a straight-line basis in years 0, 1, 2, and 3. Complete this question by entering your answers in the tabs below. Required A Required B Compute the after-tax cost of the overhaul if Jarmex must capitalize the $55,000 payment to the asset account and can recover it on a straight-line basis in years 0, 1, 2, and 3. (Cash outflows and Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answers to the nearest whole dollar amount.) Year 0 Year 1 Year 2 Year 3 Before-tax cost Tax (cost) or savings After-tax cost $ $ 0 $ 0 $ O 0 Discount factor (7%) Present value $ 0 NPV of after-tax cost
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