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Compute the present value of the after-tax cost

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Question - 1. Compute the present value of the after-tax cost ("PVATC") of purchasing equipment that your corporate client can depreciate using MACRS if the before-tax cost was $2,400,000 and your after-tax discount rate is 6%. Assume that all tax savings occur at the end of the deduction year. Hint: carefully "map out" when all the cash flows occur and discount as needed.

2. Same as #1, except that you can take 100% bonus depreciation (i.e., all in the year of purchase) on the equipment. How much greater is the PVATC in #1?

Reference no: EM133043527

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