What tax is paid in year-zero dollars

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Reference no: EM132168908

Question: An engineering and construction management firm with a taxable income of $1M is opening a branch office. Nearly $250,000 worth of furniture will be depreciated under MACRS. Inflation is expected to be 6%.

(a) What are the after-tax cash flows for the first 5 years in year-0 dollars?

(b) If the office is closed early in year 6 and the furniture is sold to a secondhand office furniture store for 10% of its initial cost, what tax is paid in year-0 dollars?

Problem: An engineering and construction management firm with a $1M taxable income is opening a branch office. Nearly $250,000 worth of furniture will be depreciated under MACRS.

(a) What are the ATCFs for the furniture for the first 5 years?

(b) If the office is closed early in year 6 and the furniture is sold to a secondhand office furniture store for 10% of its initial cost, what tax is paid?

Reference no: EM132168908

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