How much net saving after taxes would the company achieve

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Reference no: EM131061563

The initial installed cost for a new piece of equipment is $10,000, and its scrap value at the end of its useful life is estimated to be $2000. The useful life is estimated to be 10 years. After the equipment has been in use for 4 years, it is sold for $7000. The company which originally owned the equipment employs the straight-line method for determining depreciation costs. If the company had used an alternative method for determining depreciation costs, the asset (or book) value for the piece of equipment at the end of 4 years would have been $5240. The total income-tax rate for the company is 34 percent of all gross earnings. Capital-gains taxes amount to 34 percent of the gain. How much net saving after taxes would the company have achieved by using the alternative (in this case, reducing-balance) depreciation method instead of the straight-line depreciation method?

Reference no: EM131061563

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