your consulting company purchased a high powered server (3 year MACRS property)
ID: 2727008 • Letter: Y
Question
your consulting company purchased a high powered server (3 year MACRS property) for $200,000. this server is expected to increase productivity of the engineers and designers such that 60,000 per year is saved over its economic life of 5 years. 50% of the servers cost ($100,000) 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?
consider the project described above, create a net cash flow table to get net cash flow after taxes. Include all necessary columns in the table. the effective tax rate is 30%
Explanation / Answer
npr 5 loan 100000 rate 8% PMT $25,045.65 total interest divided in ratio of 5:4:3:2:1 (25045.65*5)-100000 25228.25 year depreciation rate depreciation tax shield tax shield on interest tax shield net cash flow 1 33.33% 66660 19998 8409.417 2522.825 64520.825 2 44.45% 88900 26670 6727.533 2018.26 70688.26 3 14.81% 29620 8886 5045.65 1513.695 52399.695 4 7.41% 14820 4446 3363.767 1009.13 47455.13 5 0.00% 0 0 1681.883 504.565 42504.565
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