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QUESTION
Ajax Corp. is expecting revenues of $175,000 in each of the next six years before depreciation and taxes.
Ajax Corp. is expecting revenues of $175,000 in each of the next six years before depreciation and taxes. It will purchase a new machine costing $97,000 plus $15,000 installation costs, and will have a recovery period of a five-year class asset.
- Calculate the depreciation expense in year four using the MACRS depreciation schedule. (Use the following MARCS percentages for this asset - Yr 1: 20%; Yr 2: 32%; Yr 3: 19.2%; Yr 4: 11.5%; Yr 5: 11.5%; Yr 6: 5.8%)
- Calculate the expected "net income" for year six. Assume a tax rate of 40%. (Hint: subtract ALL expenses from revenue)
