In $2024,$ a company purchases $$300,000$ worth of PP&E$.$ In $2034,$ the facility can be sold for $$26,000.$ the ATO confirms that for tax purposes, the new PP&E has an eight$-$year tax life. However, in the companys experience, PP&E can be operated effectively for a full$-$ten years before they need replacing. It must be noted that any associated asset's depreciation expense begins in $2025,$ and the financial analysis will be conducted over $10$ years. Additionally, the ATO states that all non$-$current assets be depreciated to Zero.

The tax rate is $30\%$

In regards to this information, answer the following questions.

$1.$ What is the depreciation tax savings over the life of the financial analysis.

$2.$ What is the tax effect of the sale of the PP&E in the final year of cash flows.

Answer rating: 100% (QA)

To calculate the depreciation tax savings over the life of the financial analysis we need to determine the annual depreciation expense and then calcul... View the full answer