Sohar steel LLC is planning to purchase a building for OR.800,000. Acquisition cost of building includes OR.90,000 for land area and company will incur a renovation cost of OR.70,000. The estimated annual cost of the building includes Repairs and maintenance is OR.25,000, Property tax is OR.16,000, Insurance 5%. Annual Depreciation is based on estimated economic life of 20 years with no salvage value. The cost of capital for the company is 10%. Alternatively, company can lease the building with an annual rent of OR.80,000 and incur cost of property taxes, insurance, and necessary repairs. You are required to calculate the total annual cost, if Sohar company purchase the asset. a. RO.210,500 b. RO.184,500 c. RO.222,500 d. None of the options

Q: Consider the following financial data for an investment project:• Required capital investment al n =…

A: The calculation is: Note: No depreciation in the 10th year will be there because the project will…

Q: Sweet Acacia Company is considering two capital expenditures. Relevant data for the projects are as…

A: Project A:Initial investment = $218,669Annual cash inflow = $42,000Salvage value = $0Useful life = 7…

Q: Pillows Incorporated was considering an investment in the following project: Required initial…

A: Initial Investment  $    10,30,000.00 Net annual after-tax cash inflow  $     1,73,000.00 Annual…

Q: A Corporation is planning to add a new product line to its present business. The new product will…

A: The liquidity and yield theories are those that makes the investor to demand more interest or…

Q: Project Y requires a $324,000 investment for new machinery with a six-year life and no salvage…

A: Please fallow the answer below: Let us know about Annual  cash flow means: Net cash flow is…

Q: 2.

A: The objective of the question is to calculate the after-tax salvage value of the equipment. The…

Q: Pina Colada Corporation acquires a coal mine at a cost of $ 863,800. Intangible development costs…

A: Solution:- Calculation of Depletion note per ton as follows;- =($863,800+$221,000+$93,000-$120,000)…

Q: Company Q is considering a project which needs an equipment. The cost of the equipment is $350,000.…

A: Given: Sales $175,000 Cost $93,000 Tax 40% Cost of equipment = $350,000

Q: ABC bought a piece of land in a highly developing area for a purchase price of P4,000,000. Directly…

A: Purchase Price                  P 40,00,000.00 Cots Incurred Buying                    P…

Q: Bridgeport Company is considering two capital expenditures. Relevant data for the projects are as…

A: IRR is also known as Internal rate of Return. It is a capital budgeting technique which helps in…

Q: Vincent Limited paid $100,000 to purchase equipment at the beginning of 2020. Vincent Limited…

A: Given: Equipment purchased                      $100,000 Estimated useful life is 5 years or 200,000…

Q: A firm can purchase a centrifugal separator​ (5-year MACRS​ property) for ​$22,000. The estimated…

A: Net Present Value=(Present Value of Cash Inflows-Present Value of Cash Outflows)

Q: Barton Corporation acquires a coal mine at a cost of $1,800,000. Intangible development costs total…

A: INTRODUCTION: Depletion is a technique used in accounting and financial reporting to help classify…

Q: A corporation can buy a machine for 15,000$ with life of five years and a salvage value (selling…

A: Present worth = Present value of revenues + present value of salvage - Investment

Q: Consider an asset that costs $369,600 and is depreciated straight-line to zero over its 7-year tax…

A: cost of the asset = $369,600 Depriciation each year =$369,600/7 = 52800 Value of asset after 4 years…

Q: Holly, Incorporated has a building that originally cost $460,000. Holly expects to be able to sell…

A: 1. Depreciation Expenses - Depreciation Expenses are the expense incurred on the wear and tear of…

Q: A nine year project involves equipment costing $2,320,000 that will be depreciated using the…

A: 1. After tax salvage value of the equipment = Pre-tax  salvage value - Tax expenses on sale of…

Q: An asset used in a four-year project falls in the five-year MACRS class for tax purposes. The asset…

A: after tax salvage value is calculated as follows:-after tax salvage value  = Sale price of asset -…

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.