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Texas A&M University College of Engineering

Class 7

Posted on July 27, 2021 by Abigail Stason

Learning Objectives – Class 7

After today’s lecture, and after working the homework problems, the student should be able to

  • Calculate when to change from modified accelerated cost recovery system to straight-line depreciation
  • Work problems involving modified accelerated cost recovery system depreciation
  • Derive a modified accelerated cost recovery system depreciation table for a life other than those listed in the tables
  • Work problems involving MACRS for real property as well as personal property
  • Work problems involving either corporate or individual personal taxes
  • Work problems on before-tax and after-tax rates of returns on projects
  • Work problems wherein inflation is included in the calculations
  • Calculate inflation-adjusted, or real rates of return on a project

Topics covered in today’s class

  1. MACRS depreciation – need cost, no life, no salvage and can go below salvage
  2. When to change from double-declining balance to straight line depreciation
  3. Corporate and personal tax calculations
  4. The effects of inflation on cash flows
  5. Inflation-adjusted (real) rate of return on an investment

Print out these pages and bring them to class with you:

Sample spreadsheets for:

  • MACRS depreciation.
  • Tax benefits of depreciation using MACRS vs. straightline
  • Losses due to inflation

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