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Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726 Exercise 21
Cost-Saving Device
A proposed cost-saving device has an installed cost of $59,400. It will be depreciated for tax purposes on a straight-line basis over three years (zero salvage), although its actual life will be five years. The tax rate is 34 percent and the required rate of return on investments of this type is 10 percent.
What must be the pretax cost savings per year to favor the investment? Assume a zero salvage value for the device at the end of the five years.
Source: R. Watts.
A proposed cost-saving device has an installed cost of $59,400. It will be depreciated for tax purposes on a straight-line basis over three years (zero salvage), although its actual life will be five years. The tax rate is 34 percent and the required rate of return on investments of this type is 10 percent.
What must be the pretax cost savings per year to favor the investment? Assume a zero salvage value for the device at the end of the five years.
Source: R. Watts.
Explanation
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Depreciation:
Depreciation is the part ...
Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
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