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Plastic Recycling Company is just starting operations with new equipment costing$30,000 and a useful life of five years. At the end of five years the equipment probablycan be sold for $5,000. The company is concerned with its cash flow andwants a comparison of straight-line and MACRS1 depreciation to help managementdecide which depreciation method to use for financial statements and for itsincome tax return. Assume a 40 percent tax rate.Chapter Twenty-Seven Longer-Run Decisions: Capital Budgeting 9011Modified Accelerated Cost Recovery System (effective for assets placed in use after December 31, 1986.)Required:a. Calculate the difference in taxable income and cash inflow under eachmethod. Assume MACRS allowances are 20, 32, 18, 15, and 15 percentfor years 1–5 respectively.b. Which deprecation method is preferable for tax purposes? Why?

If you want the formulas and any calculations, select the corresponding cell and press F2(Function Key on key board),It will show all calculations and formulas AutomaticallyQuesiton:Plastic…


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