Gross income less operating expenses

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An air purifier for use in manufacturing semiconductors is placed in service with a first cost of $50,000. It will be used for 8 years, have an annual gross income less operating expenses of $14,000 and will have no salvage value. Corporate income-tax rate is 25%.

a) Determine the after-tax cash flows for years 0-8 if depreciation allowances are $10,000, $16,000, $9,600, $5,760, $5,760, $2,880, $0, and $0 during the 8 years (MACRS-GDS 5-year property class).

b) Determine the after-tax cash flows for years 0-8 if depreciation allowances are $10,000 for years 1-5 and $0 in years 6-8 (SLN depreciation over only the first 5 years).

Reference no: EM133130970

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