Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The new equipment is expected to increase production and decrease costs, with a resulting increase in profits. First Cost is at $40,000; Savings per year is $10,000; Actual useful life is 5 years; Salvage value is $4000. a. Determine the ATCF using a tax rate of 42% and straight-line method of depreciation. b. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zero (b=0). PLEASE SHOW GIVEN AND REQUIRED THANK U
Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The new equipment is expected to increase production and decrease costs, with a resulting increase in profits. First Cost is at $40,000; Savings per year is $10,000; Actual useful life is 5 years; Salvage value is $4000. a. Determine the ATCF using a tax rate of 42% and straight-line method of depreciation. b. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zero (b=0). PLEASE SHOW GIVEN AND REQUIRED THANK U
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The new equipment is expected to increase production and decrease costs, with a resulting increase in profits. First Cost is at $40,000; Savings per year is $10,000; Actual useful life is 5 years; Salvage value is $4000. a. Determine the ATCF using a tax rate of 42% and straight-line method of depreciation.
b. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zero (b=0).
PLEASE SHOW GIVEN AND REQUIRED THANK U
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