a. Compute the ATCF for the 5-year period using the tabular method (Show YEAR, BTCF, DEPRECIATION, TAXABLE INCOME, INCOME TAX, ATCF). b. If the MARR for We-Clean-U is 12%, is OnGuard a worthwhile investment?
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.
iNFLATION
An engineering project team., expects to receive $70,000 each year for 5 years from the sale of its newest design, OnGuard. There will be an initial investment in new equipment of $160,000. The expenses of manufacturing and selling the design will be $17,500 per year. Straight-Line
Salvage Value. Annual income tax rate is at 30%.
a. Compute the ATCF for the 5-year period using the tabular method (Show YEAR,
BTCF, DEPRECIATION, TAXABLE INCOME, INCOME TAX, ATCF).
b. If the MARR for We-Clean-U is 12%, is OnGuard a worthwhile investment?
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