A small business purchases a used airplane for $1,200,000; this is considered MACRS 5-year property. The...

Transcribed Image Text:

A small business purchases a used airplane for $1,200,000; this is considered MACRS 5-year property. The business plans to keep the plane for the next 7 years. The business estimates that the equipment would generate annual time and travel savings of $300,000 per year. At the end of 7 years, the airplane would have a salvage value of $100,000. The tax rate is 25%, the aircraft is eligible for a Section 179 deduction, and that the small business uses an after-tax MARR of 8%. Compute the PW and determine whether the business should invest in the airplane. A small business purchases a used airplane for $1,200,000; this is considered MACRS 5-year property. The business plans to keep the plane for the next 7 years. The business estimates that the equipment would generate annual time and travel savings of $300,000 per year. At the end of 7 years, the airplane would have a salvage value of $100,000. The tax rate is 25%, the aircraft is eligible for a Section 179 deduction, and that the small business uses an after-tax MARR of 8%. Compute the PW and determine whether the business should invest in the airplane.

Answer rating: 100% (QA)

Okay here are the steps to solve this problem 1 Compute MACRS depreciation deductions ... View the full answer