Depreciating the machine using straight-line depreciation

Reference no: EM13882993

A firm purchased a machine with a life of four years. Depreciating the machine using straight-line depreciation over the four years yields a NPV = -$10. The initial investment was $1000, cost of capital = 15%, and tax rate = 34%. If the firm is allowed to depreciate the machine under the MACRS 3-year class, what will be the new net present value? (MACRS table is on page 316, Table 10.7 in the text). Assume losses, if any, will save taxes on other operations of the company.

MACRS table

Year

1 33.33%

2 44.45

3 14.81

4 7.41

Reference no: EM13882993

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