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The MACRS Depreciation Schedule Discussion Paper An asset in the five-year MACRS property class costs $150,000 and has a zero estimated salvage value after six yean of use. The asset will generate annual rovenues of $320,000 and will requike $60,000 in annual labor and $50,000 in annual material expensee. There are no other revenues and expenses, Assume a tax rate of 25% Cick the icon to view the MACRS depreciation schedulos. Click the icon to view the intoreat factors for discrele compounding when in 12% per year. (a) Compute the after-tax cash flows over the project ife. Fall in the table below. (Round to two decinal piaceo.) The MACRS Depreciation Schedule Discussion Paper ORDER YOUR PAPER NOW Step-by-step Step 1/2 (a) Employment Notes: (1) The MACRS depreciation schedule is as follows. Year Cost ($) Depreciation Rate (%) Annual Depreciation ($) 1 1,50,000 20 30,000 2 1,50,000 32 48,000 3 1,50,000 19.2 28,800 4 1,50,000 11.52 17,280 5 1,50,000 11.52 17,280 6 1,50,000 5.76 8,640 Explanationfor step 1 (2) Taxable Income (TI) ($) = Annual Income - Labor Cost - Material Cost - Depreciation  = 320,000 - 80,000 - 50,000 - Depreciation = 190,000 - Depreciation Step 2/2 (3) After Tax Income = TI x (1 - Tax Rate) = TI x (1 - 0.21) = TI x 0.79 (4) After Tax Cash Flow (ATCF) = After Tax Income + Depreciation Explanationfor step 2 The answer is mentioned above. Final answer Year TI ($) Depreciation ($) After-tax income ($) ATCF ($) 0 -5,00,000 1 1,60,000 30,000 97,600 1,27,600 2 1,42,000 48,000 86,620 1,34,620 3 1,61,200 28,800 98,332 1,27,132 4 1,72,720 17,280 1,05,359 1,22,639 5 1,72,720 17,280 1,05,359 1,22,639 6 1,81,360 8,640 1,10,630 1,19,270 The MACRS Depreciation Schedule Discussion Paper
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The MACRS Depreciation Schedule Discussion Paper An asset in the five-year MACRS property class costs  and has a zero estimated salvage value after six yean of use. The asset will generate annual rovenues of  and will requike  in annual labor and  in annual material expensee. There are no other revenues and expenses, Assume a tax rate of  Cick the icon to view the MACRS depreciation schedulos. Click the icon to view the intoreat factors for discrele compounding when in  per year. (a) Compute the after-tax cash flows over the project ife. Fall in the table below. (Round to two decinal piaceo.) The MACRS Depreciation Schedule Discussion Paper

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Step-by-step

Step 1/2
(a) Employment Notes:
(1) The MACRS depreciation schedule is as follows.
Year
Cost ($)
Depreciation Rate (%)
Annual Depreciation ($)
1
1,50,000
20
30,000
2
1,50,000
32
48,000
3
1,50,000
19.2
28,800
4
1,50,000
11.52
17,280
5
1,50,000
11.52
17,280
6
1,50,000
5.76
8,640
(2) Taxable Income (TI) ($) = Annual Income - Labor Cost - Material Cost - Depreciation
 = 320,000 - 80,000 - 50,000 - Depreciation = 190,000 - Depreciation
Step 2/2
(3) After Tax Income = TI x (1 - Tax Rate) = TI x (1 - 0.21) = TI x 0.79 (4) After Tax Cash Flow (ATCF) = After Tax Income + Depreciation
The answer is mentioned above.
Final answer
Year
TI ($)
Depreciation ($)
After-tax income ($)
ATCF ($)
0
-5,00,000
1
1,60,000
30,000
97,600
1,27,600
2
1,42,000
48,000
86,620
1,34,620
3
1,61,200
28,800
98,332
1,27,132
4
1,72,720
17,280
1,05,359
1,22,639
5
1,72,720
17,280
1,05,359
1,22,639
6
1,81,360
8,640
1,10,630
1,19,270
The MACRS Depreciation Schedule Discussion Paper

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