What is incremental tax rate associated with the purchase

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A small manufacturing company has an estimated annual taxable income of $95,000. Due to an increase in business, the company is considering purchasing a new machine that will generate additional before-tax annual revenue of $50,000 over the next 5 years. The machine requires an investment of $100,000, which will be depreciated under 5-yr MACRS method.

a. What is the increment in income tax caused by the purchase of the new machine in tax year one?

b. What is the incremental tax rate associated with the purchase of new equipment in year one?

Reference no: EM13199691

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