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Business, 31.03.2020 02:28 awkwardness92

In year 1, Firm A paid $50,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,140 and $7,200 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Now assume that Firm A borrowed $50,000 to purchase the asset. In each year, it paid $3,800 annual interest on the debt. The interest payments were deductible.

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In year 1, Firm A paid $50,000 cash to purchase a tangible business asset. In year 1 and year 2, it...
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