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Date Posted: 20:33:49 05/04/00 Thu
Author: brian kessler
Subject: Re: Capital Budgeting Problem 7
In reply to: Shiri Segev 's message, "Capital Budgeting Problem 7" on 16:38:39 05/04/00 Thu

Shiri,

The problem states that "the new oven will earn the 4000 per year over its "full" MACRS depreciable life. The depreciable life under MACRS is 6 years because year 1 is a half year therefore it stretches to year 6 to fit in the last half of a year. (4000 - 1200)*.6 +1200 = 2880 in year 6.

Hope this helps!!

> In Problem 7, I don't understand where the cash flow
> in Year 6 comes from? I see one final cash flow of 480
> (a tax credit for loss of book value) at Year end 5.

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