Question

In year 0, Jarmex paid $55,000 for an overhaul of a tangible operating asset. Jarmex has a 34 percent marginal tax rate and uses a 7 percent discount rate to compute NPV.
a. Compute the after-tax cost of the overhaul if Jarmex can deduct the $55,000 payment as a repair in year 0.
b. Compute the after-tax cost of the overhaul if Jarmex must capitalize the $55,000 payment to the asset account and can recover it on a straight-line basis in years 0, 1, 2, and 3.


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  • CreatedNovember 03, 2015
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