See table 2.5 showing financial statement data and stock price data for mydeco corp. suppose mydeco had purchased additional equipment for $ 12.8 million at the end of 2016, and this equipment was depreciated by $ 4.3 million per year in 2017, 2018, and 2019. given mydeco's tax rate of 35 %, what impact would this additional purchase have had on mydeco's net income in years 2016dash2019? (assume the equipment is paid for out of cash and that mydeco earns no interest on its cash balances.)

The net impact on the income will be 2,795,000 each year

Explanation:

The purchase will generate the followng:

4.3 depreciation expense

and a tax shield, as this expense decrease the net income:

depreciation x tax-rate = tax-shield

4.3 x 35% = 1.505 millions

total impact on net income:

depreciation expense - tax shield

4.3 - 1.505 = 2.795‬ millions net impact

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