Required information [The following information applies to the questions displayed below.] Manning Corporation is considering a new project requiring a $110,000 investment in test equipment with no salvage value. The project would produce $74,000 of pretax income before depreciation at the end of each of the next six years. The company's income tax rate is 38%. 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.) Straight-Line MACRS Depreciation Depreciation* $ 11,000 $ 22,000 22,000 35,200 Year 3 22,000 21,120 22,000 12,672 22,000 12,672 Year 6 11,000 6,336 $110,000 $110,000 Year 1 Year 2 Year 4 Year 5 Totals The modified accelerated cost recovery system (MACRS) for depreciation is discussed in Chapter 8. 3. Compute the net present value of the investment if straight-line depreciation is used. Use 12% as the discount rate. 1 X - 11 Answer is complete but not entirely correct. Chart Values are Based on: 12% Net Cash PV Present Year Inflow Factor Value $ 50,060 0.8929 S 44,699 2 54,240 0.7972 43,240 3 54,240 X 0.7118 38,608 54,240 0.6133 X = 33,265 5 54,240 X 0.5428 29,441 6 50,060 0.4803 24,044 Present value of cash inflows $ 213,297 Present value of cash outflows 110,000 Net present value $ 103,297 >> 4 XXO X