TPC 07-03 (Static) (LO 7-5, 7-8, 7-9) 7 MG, a corporation in the 21 percent marginal tax bracket, owns equipment that is fully depreciated. This old equipment is still operating and should continue to do so for four years years 0 1 2 and 3). MG's chief financial officer estimates that repair costs for the old equipment will be $1300 in year 0. 51400 in year 1 $1.500 in year 2, and $1,600 in your 3. At the end of year 3 the equipment will have no residual value. MG could junk the old equipment and buy new equipment for $5,000 cash. The new equipment will have a three-year MACRS recovery period, should not require any repairs during years through 3. and will have no residual value at the end of year 3. Assume MG cannot make a Section 179 election to expense the $5,000 cost of the new equipment, tuse a 10 percent discount rate Use Table 2. Andis A and Boendis Required: --1. Calculate the NPV of after tax cost MG keeps the old equipment --2. Calculate the NPV offerte cost of MG buy new equipment 0-3. Which option keep old or buy new) minimizes MG's after tax cost? b. Assume can make a Section 179 election to expense the entire $5.000 cost of the new equipment. Under this change in facts, which option keep old or buy new minimize MG's after-tax cost? Complete this question by entering your answers in the tabs below. HA AMG can make a section election to open the $5,000 of the newest Under the changes ods, which option or women Nos > O - Tom & 2 $ 4 3 Un 6 8 9 DAN W E RT TI Y U O 1 S D F G H J ter KOOD TPC 07-03 (Static) (LO 7-5, 7-8, 7-9) 7 MG, a corporation in the 21 percent marginal tax bracket, owns equipment that is fully depreciated. This old equipment is still operating and should continue to do so for four years years 0 1 2 and 3). MG's chief financial officer estimates that repair costs for the old equipment will be $1300 in year 0. 51400 in year 1 $1.500 in year 2, and $1,600 in your 3. At the end of year 3 the equipment will have no residual value. MG could junk the old equipment and buy new equipment for $5,000 cash. The new equipment will have a three-year MACRS recovery period, should not require any repairs during years through 3. and will have no residual value at the end of year 3. Assume MG cannot make a Section 179 election to expense the $5,000 cost of the new equipment, tuse a 10 percent discount rate Use Table 2. Andis A and Boendis Required: --1. Calculate the NPV of after tax cost MG keeps the old equipment --2. Calculate the NPV offerte cost of MG buy new equipment 0-3. Which option keep old or buy new) minimizes MG's after tax cost? b. Assume can make a Section 179 election to expense the entire $5.000 cost of the new equipment. Under this change in facts, which option keep old or buy new minimize MG's after-tax cost? Complete this question by entering your answers in the tabs below. HA AMG can make a section election to open the $5,000 of the newest Under the changes ods, which option or women Nos > O - Tom & 2 $ 4 3 Un 6 8 9 DAN W E RT TI Y U O 1 S D F G H J ter KOOD
