Your consulting company purchased a high powered server (3 year MACRS property)

Question

Your consulting company purchased a high powered server (3 year MACRS property) for $100,000. This server is expected to increase productivity of the engineers and designers such that 30,000 per year is saved over its economic life of 5 years. Fifty percent of the server's cost ($50,000) is financed with an 8% per year loan to be paid back with a uniform series over 5 years. What is the depreciation on the server for each years 1-5? (25) Consider the project described in problem Create a net cash flow table to get net cash flow after taxes. Include all necessary columns in the table. The effective tax rate id 40%

Explanation / Answer

Year Depreciation rate Equipment cost Depreciation 1 33.33%              100,000.0        33,330.00 2 44.45%              100,000.0        44,450.00 3 14.81%              100,000.0        14,810.00 4 7.41%              100,000.0          7,410.00 5 0.00%              100,000.0                       -

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