What is the taxable income in year 3

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JameisCrabLegs Inc., a seafood distributor in the State of Florida, with a 34% combined income tax rate is considering an investment of $10,000 in equipment, having depreciable life of 3 years.

The company uses the MACRS depreciation with the following depreciation rates for 3-year class: 33.33% in Year 1, 44.45% in Year 2, 14.81% in Year 3, and 7.41% in Year 4.

The projected before-tax cash flows are: -$10,000 in Year 0, $2,000 in Year 1, $8,000 in Year 2, $17,600 in Year 3, and $13,760 in Year 4.

What is the taxable income in Year 3?

Reference no: EM131958296

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