Corporation ABC is purchasing a $13 million machine

Finance Nov 27, 2020

Corporation ABC is purchasing a $13 million machine. It will cost $12,000 to transport and install the machine. The machine has a depreciable life of seven years and will have no salvage value. Assume that CCA deductions are the same as depreciation expenses. If the marginal tax rate is 35% and Corporation ABC uses straight-line depreciation, what are the depreciation expenses associated with this machine. Please provide the numeric answer to 2 decimal places.

Expert Solution

depreciation expenses = [(cost of machine + transportation and installation cost) - salvage value]/life of the machine

depreciation expenses = [($13,000,000 + $12,000) - $0)]/7 = ($13,012,000 - $0)/7 = $13,012,000/7 = $1,858,857.14

the depreciation expenses associated with this machine are $1,858,857.14.

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