An industrial equipment is purchased for $300,000. It is expected to work for 12 years before it is sold for $50,000. Moreover, the annual cost of maintaining this equipment is estimated to be $20,000. Given those information and MARR-10%, answer Questions 1-4 below: For all questions, you are required to show all calculations. 1) Use the switchover technique of 150% DB to depreciate this equipment during its service life 2) Use the Corporate Federal Tax (2006) to construct the AFTCF given the calculations obtained in Question 1 and annual revenue of $150,000 3) Use 25% income tax rate to construct the AFTCF given the calculations obtained in Question 1 and annual revenue of $150,000 4) Calculate the PWs of the two cashflows obtained in Questions 2 & 3

An industrial equipment is purchased for $300,000. It is expected to work for 12 years before it is sold for $50,000. Moreover, the annual cost of maintaining this equipment is estimated to be $20,000. Given those information and MARR-10%, answer Questions 1-4 below: For all questions, you are required to show all calculations. 1) Use the switchover technique of 150% DB to depreciate this equipment during its service life 2) Use the Corporate Federal Tax (2006) to construct the AFTCF given the calculations obtained in Question 1 and annual revenue of $150,000 3) Use 25% income tax rate to construct the AFTCF given the calculations obtained in Question 1 and annual revenue of $150,000 4) Calculate the PWs of the two cashflows obtained in Questions 2 & 3

Name: An industrial equipment is purchased for $300,000. It is expected to
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Description: An industrial equipment is purchased for $300,000. It is expected to work for 12 years before it issold for $50,000. Moreover, the annual cost of maintaining this equipment is estimated to be$20,000. Given those information and MARR-10%, answer Ques

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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Concept explainers

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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Question

An industrial equipment is purchased for $300,000. It is expected to work for 12 years before it is
sold for $50,000. Moreover, the annual cost of maintaining this equipment is estimated to be
$20,000. Given those information and MARR-10%, answer Questions 1-4 below:
For all questions, you are required to show all calculations.
1) Use the switchover technique of 150% DB to depreciate this equipment during its service life
2) Use the Corporate Federal Tax (2006) to construct the AFTCF given the calculations
obtained in Question 1 and annual revenue of $150,000
3) Use 25% income tax rate to construct the AFTCF given the calculations obtained in Question
1 and annual revenue of $150,000
4) Calculate the PWs of the two cashflows obtained in Questions 2 & 3

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