What depreciation expense will it be able to claim this year

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Question - Milestone, Inc expects to report pre-tax income of $430,000 this year. The company's financial manager is considering the timing of a purchase of new computerized machine. The machine will have an installed cost of $80,000 and a cost recovery period of 5 years. They will be depreciated using the MACRS schedule.

Required -

a. If the firm purchases the machine before year end, what depreciation expense will it be able to claim this year?

b. If the firm reduces its reported income by the amount of the depreciation expense calculated in part a, what tax savings will result (assuming tax rate is 40%)?

c. Assuming that Milestone does purchase the machine this year and that they are its only depreciable asset, use the accounting definition to find the firm's cash flow from operations for the year.

Reference no: EM133097446

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