Required information Problem 24-3A Computation of cash flows and net present values with alternative depreciation methods LO P3 (The following information applies to the questions displayed below.) Manning Corporation is considering a new project requiring a $100,000 investment in test equipment with no salvage value. The project would produce $68,500 of pretax income before depreciation at the end of each of the next six years. The company's income tax rate is 30%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1. FV of $1. PVA of $1, and FVA of $1) (Use MACRS) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Totals Straight-Line Depreciation $ 10,000 20,000 20,000 20,000 20,000 10,000 $100,000 MACRS Depreciation* $ 20,000 32,000 19,200 11,520 11,520 5,760 $100,000 * The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8. Problem 24-3A Part 3 3. Compute the net present value of the investment if straight-line depreciation is used. Use 6% as the discount rate. Chart Values are Based on: 12% Year Net Cash Inflow X Present Value PV Factor - 0.8929 0.7972 0.7118 0.6355 = 0.5674 0.5066 = Net present value