On January 1, 2017, AmerEx Transportation Company purchased a used aircraft at a cost of $64,400,000. AmerEx expects the plane to remain useful for five years (7,000,000 miles) and to have a residual value of $6,400,000. AmerEx expects to fly the plane 775,000 miles the first year, 1,200,000 miles each year during the second, third, and fourth years, and 2,625,000 miles the last year. (Click the icon to view the first year depreciation amounts under each method.) Read the requirements. 1. Which depreciation method offers the highest tax advantage for the first year? Describe the nature of the tax advantage. The double-declining-balance method offers the tax advantage for the first year of the asset's use. The advantage results from the greater amount of depreciation (versus the other methods) in the first year. This method also produces the fastest tax deductions and conserves cash that the taxpayer can invest to earn more income. 2. How much income tax will AmerEx save for the first year of the airplane's use under the method you just selected as compared with using the straight-line depreciation method? The company's income tax rate is 32%. Ignore any earnings from investing the extra cash. (Round the depreciation rates to two decimal places. Round your final answers to the nearest whole dollar.) Compute the tax savings: Less: Straight-line depreciation Excess depreciation tax deduction 32% Income tax rate Income tax savings for first year