Angiletta Corporation: PV of future cash flows, Book deprec
Not what you're looking for?
Angiletta Corporation is considering a new project requiring a $30,000 investment in test equipment with no salvage value. The project would produce $12,000 of pretax income before depreciation at the end of each of the next six years. The company's income tax rate is 40%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table.
Straight-Line
Depreciation MACRS
Depreciation
Year 1 $ 3,000 $ 6,000
Year 2 6,000 9,600
Year 3 6,000 5,760
Year 4 6,000 3,456
Year 5 6,000 3,456
Year 6 3,000 1,728
Totals $ 30,000 $ 30,000
1. Compute the net present value of the investment if straight-line depreciation is used. Use 10% as the discount rate. (Round "PV Factor" to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.)
2. Compute the net present value of the investment if MACRS depreciation is used. Use 10% as the discount rate. (Round "PV Factor" to 4 decimal places. Round your intermediate calculations and final answer to the nearest dollar amount. Omit the "$" sign in your response.)
Purchase this Solution
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Balance Sheet
The Fundamental Classified Balance Sheet. What to know to make it easy.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Income Streams
In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.