Answered: Defender Challenger First cost, $ -45…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Justyne needs assistance with the information shown below. The defender can be replaced now or kept for 4 more years. (Notes: All monetary values are in $1000 units. Assume that either asset is salvaged in the future at its original salvage estimate. Since no revenues are estimated, all taxes are negative and considered “savings” to the alternative. Neglect any capital gains or losses.)

a. Perform a PW-based replacement study using an after-tax MARR = 12% per year and T_e = 35%. Do this using hand calculations.
b. Verify your results using a spreadsheet-based replacement study.

Defender
Challenger
First cost, $
-45
-24
Estimated S at purchase, $
5
Market value now, $
35
|
АОС, $ per year
-7
-8
Depreciation method
SL
MACRS
Recovery period, years
Useful life, years
3
8
Years owned
3

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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