What is the incremental present value of the tax benefits

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Question - Freedom Corporation acquired a fixed asset for $300,000. Its estimated life at time of purchase was 4 years, with no estimated salvage value. Assume a discount rate of 7% and an income tax rate of 40%.

Required -

1. What is the incremental present value of the tax benefits resulting from calculating depreciation using the sum-of-the-years'-digits (SYD) method rather than the straight-line (SLN) method on this asset? Use the SYD and SLN functions in Excel to calculate depreciation charges.

2. What is the incremental present value of the tax benefits resulting from calculating depreciation using the double-declining-balance (DDB) method rather than the straight-line (SLN) method on this asset? Use the SLN and DDB functions in Excel to calculate depreciation charges.

3. What is the incremental present value of the tax benefits resulting from using MACRS rather than straight-line (SLN) depreciation? The asset qualifies as a 3-year asset. Use the half-year convention.

Reference no: EM133075536

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