There is a startup name BlueEagle. The business was created exactly 4 years ago and acquired all
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Question:
There is a startup name BlueEagle. The business was created exactly years ago and acquired all its capital assets within a very short period at the inception of the business. At the time, the firm spent about $ on equipment; virtually all of which is classified as being in the year MACRS class. The MACRS yearly depreciation rates are and respectively. No capital assets have been sold to date.
This morning, reviewing financial statements for the th year of the business, which just ended, you realized that the accounting manager made a mistake in calculating depreciation. Specifically, the manager overlooked the first entry in the MACRS table above and recognized depreciation in year N of the project by using the Nth entry in the MACRS table. For example, in year of the project, annual depreciation was calculated using a rate of instead of the correct ; then, in year a rate of was used instead of the correct
Assuming that you are paying a flat tax rate of and that the suitable investment interest rate is per year, calculate the cumulative financial impact of this mistake as of the end of year Enter the value you calculated below, after rounding it to the closest dollar. Ignore any legal complications and also any tax penalties that the firm may have to pay. If the firm suffered an overall loss, enter a negative amount; otherwise enter a positive amount.
Hint: You may wish to model this situation as a kind of "project" that has a number of somewhat unusual features.
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