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Depreciation Calculations for Cash Flow Analysis

CORPFN-7JDEXE

You are trying to project the cash flows for a new truck your company is thinking of buying. The truck will cost \$50,000, and your company uses straight-line depreciation for book purposes but MACRS for tax. The truck has a depreciable life of 3 years under either method.

How much depreciation expense should you include in year one of your analysis?

Note: MACRS factors are 33%, 45%, 15%, and 7% for years 1-4.

A

\$16,667

B

\$16,500

C

Impossible to calculate, you need to know the salvage value.

D

Neither, depreciation doesn't matter for cash flows.