What is the present value of the tax savings

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Problem - Jamie purchased $100,000 of new office furniture for her business in June of the current year. Jamie understands that if she elects to use ADS to compute her regular income tax, there will be no difference between the cost recovery for computing the regular income tax and the AMT.

Required -

a. Jamie wants to know the present value of the tax cost, after three years, of using ADS rather than MACRS. Assume that Jamie does not elect § 179 expensing, she does not claim any additional first-year depreciation, and her combined state and Federal income marginal tax rate is 32%.

b. What is the present value of the tax savings/costs that result over the life of the asset if Jamie uses MACRS rather than ADS?

c. Present your solution to part (b) of the problem in a spreadsheet using appropriate Microsoft Excel formulas. E-mail your spreadsheet to your instructor with a one-paragraph explanation.

Reference no: EM132667636

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