CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 10, Problem 5PROB
Summary Introduction
Cost of asset includes all the cost which incurs for acquiring the machine. Cost includes shipping and installation cost.
MACRS stands for modified accelerated cost recovery system. Life of the asset will be classified as per the internal revenue code.
Five years MACRS rates, Year 1: 20%, Year 2: 32%, Year 3: 19.20% and Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76%.
WT is considering purchase of an asset which cost $214,000 and required installation cost of $26,000. New machine falls under five years MACRS class.
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