1. A/Your company just bought a truck for $65,000. You expect the truck to last for 9 years and to have a salvage value of $6000 at the end of that period. Using the Straight Line depreciation model, what is the annual depreciation on the truck?

B/ What is the depreciation schedule for the truck if you use the Declining Balance Model? Assume a depreciation percent of 26%. What is the advantage of Declining Balance over Straight Line?

C/ Your corporation pays a corporate income tax rate of 21% in the United States. If you buy an asset for $29,000 and depreciate it over 7 years with a salvage value of $2000 at the end of its life, what is the depreciate value each year using the Straight Line depreciation model? What is the actual cash impact of this depreciation and where does it come from?

D/ You are proposing a new project that involves an initial investment of $50,000 and will generate an expected return of $5000 per year for the next 12 years. Assuming a discount rate of 4% per year and a corporate tax rate of 21%, what is the NPV of this cashflow before and after taxes?

E/ You have bought an asset for $25,000 with a useful life of five years and a salvage value of $5000. At the end of 6 years, you are surprised to find that it sold for $6000. What is the impact of this on your corporate taxes in year 6?

Answer rating: 100% (QA)

A The annual depreciation for the truck using the Straight Line Model is 6500 per year 65000 6000 9 ... View the full answer