Asset A will have a useful life of 12 years and cost $5M; it will have installation costs of $250,000 and a salvage or residual value of $750,000. Asset B will have a useful life of 8 years and cost $2.5M; it will have installation costs of $130,000 and a salvage or residual value of $600,000. Which asset will have the greater annual straight-line depreciation and by how much? A. B by $628,750 B. A by $121,250 C. A by $108,750 D. B by $328,750
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- A piece of equipment has an initial cost of $125,000. The annual 0&M costs are $31,000 and increase $1000 per year. The annual revenue is $45,000 and increase $1,500 per year. The equipment has a life span of 8 years and a salvage value of $30,000. Based on a MARR of 5%, determine the following: a. If the project is viable based on Net Present Worth. b. Determine the amount the annual revenue has to be increased to make the project viable. c. Determine the amount the salvage value has to increase to make the project viable.A new piece of equipment has a first cost of $300,000 with no salvage value. It will generate annual revenues of $80,000, annual expenses of $40,000, and has a recovery period of 10 years. a) Using Straight-Line Depreciation, an effective tax rate of 20%, and a MARR of 10%, construct a complete income statement. b) What is the NPV of this project?A project with a life of 11 has an initial fixed asset investment of $42,000, an initial NWC investment of $4,000, and an annual OCF of -$64,000. The fixed asset is fully depreciated over the life of the project and has no salvage value.If the required return is 19 percent, what is the project's equivalent annual cost, or EAC?
- A two-year project has an initial requirement of $500,000 for fixed assets and $100,000 for net working capital. The fixed assets will be depreciated using MACRS and the fixed asset falls into the three-year MACRS class. Depreciation rates for years 1 and 2 are 0.3333 and 0.4445. The estimated salvage value is $120,000. All of the net working capital will be recouped at the end of the 2 years. Management estimates that sales revenues less costs will be $700,000 per year for years 1 and 2. The discount rate is 9 percent and tax rate is 35 percent. What is the initial investment for this project? $513,327.50 ○ $600,000 $1,300,000 $500,000An asset is planned to be purchased with an initial value of $400,000 and an estimatedsalvage value of $50,000 after 5 years of use. It will be depreciated using the straight-line method.With this asset $500,000 of annual income will be generated and there will beannual costs of $100,000The trem (minimum acceptable rate of return), m = 10% per yearThe annual tax rate is 40%Calculate the present value of this investment and make a recommendation. Please show your workA surface mount PCB placement/soldering line is to be installed for $1.6 million. It will have a salvage value of $100,000 after 5 years. Determine the depreciation deduction and the resulting unrecovered investment during each year of the asset’s life. Use declining balance depreciation with a rate that ensures the book value equals the salvage value.
- A five-year project has an initial fixed asset investment of $280,000, an initial NWC investment of $24,000, and an annual OCF of −$23,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 12 percent, what is this project’s equivalent annual cost, or EAC?An automation asset with a high first cost of $10 million has a capital recovery (CR) of $1,985,000 per year. The correct interpretation of this CRvalue is that:a. the owner must pay an additional $1,985,000 each year to retain the asset.b. each year of its expected life, a net revenue of $1,985,000 must be realized to recover the $10 million first cost and the required rate ofreturn on this investment.c. each year of its expected life, a net revenue of $1,985,000 must be realized to recover the $10 million first cost.d. the services provided by the asset will stop if less than $1,985,000 in net revenue is reported in any year.A piece of equipment has a first cost of $165,000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000 – 23.000k, where k is the number of years since it was purchased, The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 12,000k. The interest rate is 13% per year. Determine the economic service life and the respective AW. The economic service life is 4 year(s) and the AW value is $ 100,000 a
- A generator costs ₱500,000 and whose salvage value is ₱10,000 after 20 years. How much is the depreciation charge at the end of 12 years using SYDM, What is the total depreciation at the end of 12 years using SYDM, and What is its book value at the end of 12 years using SYDM?A five year project has an initial fixed asset investment of $15,960, an initial NWC investment of $1,520, and an annual OCF of $24,320. The fixed asset is fully depreciated over the life of the project and has no salvage value. required: if the required return is 11 percent, what is the projects equivalent annual cost, or EAC?Project A requires a $280,000 initial investment for new machinery with a five-year life and a salvage value of $30,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $20,000 per year for the next five years. Compute Project A’s payback period.