Pneumatics Engineering purchased a machine that had a first cost of $40,000, an expected useful life of 8 years, a recovery period of 10 years, and a salvage value of $10,000 The operating cost of the machine is expected to be $15,000 per year The inflation rate is 6 per year and the company 's MAR...

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Pneumatics Engineering purchased a machine that had a first cost of $40,000, an expected useful life of

Question:

Pneumatics Engineering purchased a machine that had a first cost of $40,000, an expected useful life of 8 years, a recovery period of 10 years, and a of $10,000. The operating cost of the machine is expected to be $15,000 per year. The inflation rate is 6% per year and the company's is 11% per year. Determine
(a) The depreciation charge for year 3,
(b) The present worth of the third-year depreciation charge in year 0, the time of asset purchase,
(c) The book value for year 3 according to the straight line method.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...