A new absorption chiller system costs $360,000 and will save $52,500 in each of the next 12 years. The asset is classified as a seven-year MACRS property for depreciation purposes. The expected salvage value is $20,000. The firm pays taxes at a combined rate of 40% and has an MARR of 12%. What is the net present worth of the system?(a) $46,725(b) $63,739(c) $62,112(d) $53,317
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A new absorption chiller system costs $360,000 and will save $52,500 in each of the next 12 years. The asset is classified as a seven-year MACRS property for
(a) $46,725
(b) $63,739
(c) $62,112
(d) $53,317
Trending now
This is a popular solution!
Step by step
Solved in 10 steps with 18 images
