7-8. An asset for drilling was purchased and placed inservice by a petroleum production company. Its cost basisis $60,000, and it has an estimated MV of $12,000 at theend of an estimated useful life of 14 years. Compute thedepreciation amount in the third year and the BV at theend of the fifth year of life by each of these methods: (7.3,7.4)a. The SL method.b. The 200% DB method with switchover to SL.c. The GDS.d. The ADS.

Answered: Image /qna-images/answer/15701712-db6a-478a-bdbe-eea99d240e57.jpg

Answered: 7-8. An asset for drilling was…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. An asset has an initial cost of $80,000, a salvage value of $10,000, and a depreciation life of 8 years. a) Determine the book value for year 3 using straight-line depreciation. b) Determine the depreciation for year 3 using double declining balance depreciation. Determine the equivalent annual capital recovery_plus a return of 10% for year 3, assuming double declining balance depreciation. c)
A furniture company buys a forest to obtain wood for manufacturing furniture. The related costs to theforest are:Cost of buying the forest = $730,000,000Wood expected to be extracted = 400,000 tonCost of restoration of the forest = $120,000,000Residual/salvage value = $233,000,000Trees cut in year 1 = 107,000 tonsTrees cut in year 2 = 89,000 tonsCompute the depletion rate and depletion charge for the first 2 years.
Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is $9 million. The salvage value after 6 years is $700,000. Anticipated net contribution to income is $6 million the first year, decreasing by $1 million each year for 6 years, with all dollar amounts expressed in real dollars. Depreciation follows MACRS 5-year property, taxes are 40 percent, the real MARR is 18 percent, and inflation is 4 percent. g. Determine the real IRR of the after-tax cash flows. h. Determine the real ERR of the after-tax cash flows.
You are evaluating two different silicon wafer milling machines. The Techron | costs $264,000, has a 3-year life, and has pretax operating costs of $71,000 per year. The Techron Il costs $460,000, has a 5-year life, and has pretax operating costs of $44,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $48,000. If your tax rate is 22 percent and your discount rate is 12 percent, compute the EAC for both machines. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) > Answer is complete but not entirely correct. Techron I $ -134,840.83 Techron II $ -107,570.18
Machinery for an assembly line has a cost basis of $150,000 and an expected salvage of $25,000. It is not subject to special limitations for bonus depreciation. How much bonus depreciation was, is, or will be allowed (a) in 2014? (b) in 2018? (c) in 2024? (d) in 2026?
A machine has an initial cost of P50,000 and a salvage value of P10,000 after 10 years. What is the straight-line method depreciation rate as a percentage of the initial cost? With Cash flow diagram
You are evaluating two different silicon wafer milling machines. The Techron I costs $270,000, has a 3-year life, and has pretax operating costs of $73,000 per year. The Techron II costs $470,000, has a 5-year life, and has pretax operating costs of $46,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $50,000. If your tax rate is 24 percent and your discount rate is 10 percent, compute the EAC for both machines. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Techron I Techron II
< A crane rental company has acquired a new heavy-duty crane for $210,000. The company calculates depreciation on this equipment on the basis of number of rentals per year, and the salvage value of the crane at the end of its 9-year life is $20,000 If the crane is rented an average of 101 days per year, what is the depreciation rate per rental? The depreciation is $ per day of rent. (Round to the nearest dollar.) E
Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The newequipment is expected to increase production and decrease costs, with a resulting increase in profits.First Cost is at $40,000; Savings per year is $10,000; Actual useful life is 5 years; Salvage value is$4000. a. Determine the ATCF using a tax rate of 42% and straight-line method of depreciation.b. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zero (b=0).
A new shoe production line is being designed at a cost of $245,000 and operating costs areexpected to be $84,000 per year. Planned annual production is 2500 pairs and the price of a pair ofshoes is $110. The line's service life is 14 years, the depreciation rate is 25%. Use a 19% annual interestrate for the base case. Using the interval [-20%, -10%, +10%, +20%], perform a present worthsensitivity analysis using a sensitivity graph with respect to the following variables in terms of theirimpact on the Present worth.a) First Costb) Operative costc) Annual Productiond) Salvage Value
A plant erected to manufacture socks has a first cost of P9,371,311 with a salvage value of x% of the first cost at the end of 15 years. If the interest rate is 5.144% and the total depreciation after 3 years is P970,000, using sinking fund method of depreciation, determine the following; a. Sinking fund factor, in %. b. Percentage of the first cost is taken as salvage value. c. Appraised value after 11 years. d. Total depreciation after 8 years.
The purchase of a motor for P6000 and a generator for P4000 will allow a company to produce its own energy. The configuration can be assembled for P500. The service will operate for 1600 hrs per year for 10yrs. The maintenance cost is P300 per year and the cost to operate is P0.85/hour for fuel and related costs. Using straight line depreciation, what is the annual cost(P) for the operation? There is P400 in salvage value for the system at the end of 10yrs.

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