Kasson Company purchased an asset for $500,000. The asset was assigned a 7-year life with no salvage value. The asset is classified in the MACRS 5-year property class and for tax purposes will be depreciated using the MACRS tables. It is expected that the asset will generate net cash inflows of $136,000 per year in each of the 7 years. Kasson Company has a cost of capital of 14% and an income tax rate of 25%.

Calculate the net present value of the asset purchased by Kasson Company.

Answer rating: 100% (QA)

Step 11 First we compute Depreciation using MACRS rate for 5 yrs Explanation Year O N... View the full answer