Fargo Corp, is considering the purchase of a new pilece of equipment The equipment costs $51,400 and will have a salvage value of $6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7.400. Fargo has a hurdle rate of 13%. a. How much is Fargo's annual depreciation on the equipment? DeprecieSion b. What is Fargo's projected annual increase in net income? Net Income c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places,) Rate of Retun
Fargo Corp, is considering the purchase of a new pilece of equipment The equipment costs $51,400 and will have a salvage value of $6,400 after nine years. Using the new piece of equipment will increase Fargo's annual cash flows by $7.400. Fargo has a hurdle rate of 13%. a. How much is Fargo's annual depreciation on the equipment? DeprecieSion b. What is Fargo's projected annual increase in net income? Net Income c. What is the accounting rate of return for purchasing the new plece of equipment? (Round your answer to 2 decimal places,) Rate of Retun
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...
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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.
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