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Test equipment with no salvage value

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Manning Corporation is considering a new project requiring a $97,000 investment in test equipment with no salvage value. The project would produce $68,000 of pretax income before depreciation at the end of each of the next six years. The company's income tax rate is 34%. In compiling its tax return and computing its income tax payments, the company can choose between the two alternative depreciation schedules shown in the table. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)


Straight-Line
Depreciation MACRS
Depreciation
Year 1 $ 9,700 $ 19,400
Year 2 19,400 31,040
Year 3 19,400 18,624
Year 4 19,400 11,174
Year 5 19,400 11,174
Year 6 9,700 5,588
Totals $ 97,000 $ 97,000

Reference no: EM13674714

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