Question: Foogle is developing a new smart contact lens. To do so, Foogle needs to purchase a machine costing $25,000,000. This machine can last for 10

  1. Foogle is developing a new smart contact lens. To do so, Foogle needs to purchase a machine costing $25,000,000. This machine can last for 10 years, however since it is only to be used during development, Foogle will only keep it for 5 years. Due to the highly specific nature of the equipment, it can only be sold for $2,000,000 in the fifth year.
  2. Your client, Foogle, wants you to consider the impact of depreciation. You want to save them the most money. Should you advise them to use straight line or double declining balance depreciation? Show your work.
  3. Given the rates for MACRS below, should you use MACRS or straight line depreciation?

MACRS

1

0.2000

2

0.3200

3

0.1920

4

0.1152

5

0.1152

6

0.0576

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