An asset was acquired by Hugo and Sons with the following values: first cost a $10,000,...

 

Transcribed Image Text:

An asset was acquired by Hugo and Sons with the following values: first cost a $10,000, depreciable life of 5 years, and S = 0. Use classical straight line depreciation and T₁ = 48% to tabulate cash flow after taxes. Expected gross income minus expenses is $5000 per year. The asset is actually salvaged after 6 years for $3075. Assume the income and expenses continued at the same level for the year after complete depreciation. (a) Re-solve Problem using MACRS depreciation over a 5-year recovery period. (b) Is there any difference between SL and MACRS depreciation in the total CFAT for the 6 years? Why? An asset was acquired by Hugo and Sons with the following values: first cost a $10,000, depreciable life of 5 years, and S = 0. Use classical straight line depreciation and T₁ = 48% to tabulate cash flow after taxes. Expected gross income minus expenses is $5000 per year. The asset is actually salvaged after 6 years for $3075. Assume the income and expenses continued at the same level for the year after complete depreciation. (a) Re-solve Problem using MACRS depreciation over a 5-year recovery period. (b) Is there any difference between SL and MACRS depreciation in the total CFAT for the 6 years? Why?