Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 32

Create an Excel spreadsheet for exercise 12-30 and demonstrate that the PV of the depreciation deductions, when the income tax rate is 40 percent, is $3,218. Given an after-tax discount rate of 12 percent, what tax rate would be needed in order for the PV of the depreciation deductions to equal $4,000? Use the Goal Seek function of Excel.

Step 1 of 6

Present value:

It shows the total amount of future‘s current value or cash flow’s stream that is given at a specific rate of return. The cash flow of the future is discounted on a discount rate, and as much the discount rate increases that much it decreases the future cash flow’s present value.