Beth's business purchased only one asset during the current year (a full 12-month tax year). Beth placed in service machinery (7
-year property) on December 1 with a basis of $50,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).
1 answer:
Answer:
the depreciation expense on the equipment will be 1,785 for tax purpose.
Explanation:
We will look into the MACRS (Modified Accelerated Cost Recovery System)
table for a property of seven years placen into service in the 4th quarter:
Which give us 3.57%
now we multiply the basis by the coefficient and get the value for depreciation
50,000 x 3.57% = 1,785 depreciation expense under MACRS
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Answer:
The question is incomplete, so I looked for a similar one:
FCF 2018 = ($4,923,478 - $1,033,930 + $605,752) - ($2,173,000 + $605,752) - ($8,501,348 - $7,600,543) = $4,495,300 - $2,778,752 - $900,805 = $815,743
FCF 2019 = ($5,960,124 - $1,251,626 + $1,239,239) - ($2,580,000 + $1,239,239) - ($7,210,800 - $5,905,791) = $5,947,737 - $3,819,239 - $1,305,009 = $823,849
FCF 2020 = ($5,998,321 - $1,259,647 + $239,895) - ($1,903,500 + $239,895) - ($5,975,324 - $4,116,364) = $4,978,569 - $2,143,395 - $1,858,960= $976,214
average annual growth rate 2018 - 2020 = {[(823,849 - 815,743)/815,743] + [(976,214 - 823,849)/823,849]} / 2 = (0.99% + 18.49%) / 2 = 9.74%
FCF 2021 = $976,214 x 1.0974 = $1,071,297
FCF 2022 = $1,071,297 x 1.0974 = $1,175,642
FCF 2023 = $1,175,642 x 1.02 = $1,199,154
first we must calculate the terminal value in 2022 = $1,199,154 / (10.5% - 2%) = $14,107,699
the firm's current value = $1,071,297/1.105 + $1,175,642/1.105² + $14,107,699/1.105² = $13,486,312
