A small business that has taxable income of less that $50k purchases a machine for $10k. The machine yields an annual benefit of $5k over its 5-year life. Is the after-tax rate of return for this item closer to 5% or 12%? Assume a straight-line depreciation.
Taxable Income = Gross income - expenditures - depreciation
Corporate Income tax = 15% over 0
Straight Line depreciation:
\(d_{t} = \frac{1}{n}(B-S)\)