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Two depreciation methods MACRS depreciation with n = 5, and SL alternative to MACRS depreciation method with n = 8 considered by a new, small
Two depreciation methods MACRS depreciation with n = 5, and SL alternative to MACRS depreciation method with n = 8 considered by a new, small business president for an asset with first cost 10,000 and no salvage value. Note that although generally not used, in this case the half-year convention will also be used for the SL method. If each year the CFBT = $4,000, select the better depreciation method based on the present worth of taxes (use the notation PW. Taxes). Use T_e = 0.35 and i = 20% per year. Create two tables, one for the MACRS method and one for the SL method, each with the following columns: Be very careful at how many rows you must have in the MACRS table and in the SL. table. Create a condensed form the SL table with only 3 rows, one for year 1 for one for year 9, and one for all years from 2 to 8. Write all the formulae you will need to compute the entries in your table and give of calculations only those for the table for each of the two depreciation methods. Write explicitly all the intermediate steps of your computations. a) Compare the two depreciation methods base on their PW of TAXES, and draw the two depreciation al respective CFD, compare and choose the best. b) What is the value of total paid in taxes for each method. Explain your answer with a brief verbal statement. What is Salvage value? What is are the similarities between the ROR Analysis method and the B/C Analysis method for choosing the best ME alrernative
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