Reference no: EM132543042

Question - On January 1, a company acquires some state-of-the-art production equipment at a net cost of $14 million. For financial reporting purposes, the firm will depreciate the equipment over a 7-year life using straight-line depreciation and a zero salvage value; for tax reporting purposes, however, the firm will use 3-year accelerated depreciation. Given a tax rate of 35% and a first-year accelerated depreciation factor of 0.333, by how much will the company's deferred tax liability increase in the first year of the equipment's life?