The initial installed cost for a new piece of equipment

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The initial installed cost for a new piece of equipment is $10,000. After the equipment has been in use for 4 years, it is sold for $7,000. The company that originally owned the equipment employs a straight-line method for determining depreciation costs. If the company had used the MACRS 5-year method for determining depreciation costs, the asset or book value for the piece of equipment at the end of 4 years would have been $1728. The total income tax rate for the company is 35% of all gross earnings. Capital gains taxes amount to 20% of the gain. How much net savings would the company have achieved by using the MACRS method instead of straight-line depreciation method?

Reference no: EM13886886

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