Problem 3.5

Max Metal Inc. uses the same type of production line in the US and Malaysia plants. The first cost was $1,000,000 with a salvage value of $250,000 at the end of year 12. MACRS depreciation with n=5 years is applied in the US and standard SL depreciation with n=12 years is used by the Malaysian facility.

a. If the equipment is sold after 6 years for $250,000, calculate the over or under depreciation amounts for each method. (10*2 points) b. Use a spreadsheet to plot the book values for both methods on a single graph. (10 points)