1.a) Using Straight Line Depreciation, what is the annual depreciation expense? b) If this asset has an...
Question:
1.a) Using Straight Line Depreciation, what is the annual depreciation expense?
b) If this asset has an expected salvage value of $20,000 at the end of 4 years, what is the depreciation expense in year three using straight-line depreciation?
c) If you depreciate the asset using a 3-year MACRS class life (33.3, 44.5, 14.8, 7.4), what is the book value at the end of year 3? Assume no salvage value.
d) Using the Double Declining Balance Method (DDB), switching to Straight Line, what is the book value at the end of year three?
2. A new piece of equipment has a first cost of $300,000 with no salvage value. It will generate annual revenues of $80,000, annual expenses of $40,000, and has a recovery period of 10 years.
a) Using Straight-Line Depreciation, an effective tax rate of 20%, and a MARR of 10%, construct a complete income statement.
b) What is the NPV of this project?