2- The marginal cost for year t is computed as SV, - SV-1+SV¢ • i+ Cost, where SVdenotes salvage value.a) TRUEb) FALSE3- Replacement rule implies replacing the existing asset when the marginal cost of theexisting asset is more than the marginal cost of the new asset.a) TRUEb) FALSE4- Depreciation recapture occurs when the market value of an asset is greater than thebook value.a) TRUEb) FALSE5-Year1SVO&M15,000 100012,000 15009.000232000The table above lists salve value (SV) and operating and mainteriance (O&M) cost of an assetthrough 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statementsis correct (choose the closest answer)?a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is$6,500b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is$7,048c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is$7,048d) The marginal cost at year 2 is S6,500 and the annual cost (EUAC) through year two is$6.000

Marginal cost signifies the supplementary cost accrued in manufacturing an additional unit of a…

2- The marginal cost for yeart is computed as SV, -SV-1 +SV,i+Cost, where SV denotes salvage value. a) TRUE b) FALSE 3- Replacement rule implies replacing the existing asset when the marginal cost of the existing asset is more than the marginal cost of the new asset. a) TRUE b) FALSE 4- Depreciation recapture occurs when the market value of an asset is greater than the book value. a) TRUE b) FALSE 5- Year 1 2 3 I SV O&M 15,000 1000 12,000 1500 9.000 2000 The table above lists salve value (SV) and operating and maintenance (O&M) cost of an asset through 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statements is correct (choose the closest answer)? a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $6,500 b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $7,048 c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $7,048 d) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $6,000

2- The marginal cost for yeart is computed as SV, -SV-1 +SV,i+Cost, where SV denotes salvage value. a) TRUE b) FALSE 3- Replacement rule implies replacing the existing asset when the marginal cost of the existing asset is more than the marginal cost of the new asset. a) TRUE b) FALSE 4- Depreciation recapture occurs when the market value of an asset is greater than the book value. a) TRUE b) FALSE 5- Year 1 2 3 I SV O&M 15,000 1000 12,000 1500 9.000 2000 The table above lists salve value (SV) and operating and maintenance (O&M) cost of an asset through 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statements is correct (choose the closest answer)? a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $6,500 b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is $7,048 c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $7,048 d) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is $6,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2- The marginal cost for year t is computed as SV, - SV-1+SV¢ • i+ Cost, where SV
denotes salvage value.
a) TRUE
b) FALSE
3- Replacement rule implies replacing the existing asset when the marginal cost of the
existing asset is more than the marginal cost of the new asset.
a) TRUE
b) FALSE
4- Depreciation recapture occurs when the market value of an asset is greater than the
book value.
a) TRUE
b) FALSE
5-
Year
1
SV
O&M
15,000 1000
12,000 1500
9.000
2
3
2000
The table above lists salve value (SV) and operating and mainteriance (O&M) cost of an asset
through 3 years with the initial cost of $20,000. Given MARR is 10%, which of the statements
is correct (choose the closest answer)?
a) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is
$6,500
b) The marginal cost at year 2 is $6,000 and the annual cost (EUAC) through year two is
$7,048
c) The marginal cost at year 2 is $6,500 and the annual cost (EUAC) through year two is
$7,048
d) The marginal cost at year 2 is S6,500 and the annual cost (EUAC) through year two is
$6.000

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Step 1: Define the term Marginal Cost

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Step 2: 2. Determine the statement is True/False

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Step 3: 3. Determine the statement is True/False

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Step 4: 4. Determine the statement is True

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Step 5: 5. Determine the (EUAC)

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Updated class practice problem to include state tax and proper consideration of asset disposal (1/2 depreciation and need BV to determine recapture or loss) GIVENS: Initial Cost $150,000 Annual net saving $50,000 state Useful life 6 years federal 6.50% 21.0% Salvage value $30,000 tax rate BTCF-D TI tax rate BTCF-Income Tax Year Taxable BTCF MACRS Depreciation Income Income Tax ATCF 0 ($150,000) ($150,000) 1 50,000 20% ($30,000) $20,000 $4,618 45,382 2 50,000 32% ($48,000) $2,000 $462 49,538 3 50,000 19.20% ($28,800) $21,200 $4,895 45,105 4 50,000 11.52% ($17,280) $32,720 $7,555 42,445 5 50,000 11.52% ($17,280) $32,720 $7,555 42,445 6 50,000 2.88% ($4,320) $45,680 $10,548 63,523 indudes 6 and disposal disposal 30,000 BV= $4,320 $25,680 $5,930 recapture ROR Question 1 What is the ATCF ROR when state taxes and asset disposal are properly considered?
All subpart in 1 question
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