i.
MACRS
Answer to Problem 43P
MACRS depreciation is $ 84800.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
A 10-year property class with half-yearly convention has been assumed.
| MACRS | ||||
| Year | Depreciation Base ($) | Depreciation Rate (%) | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 10 | 20,000 | 1,80,000 |
| 2 | 2,00,000 | 18 | 36,000 | 1,44,000 |
| 3 | 2,00,000 | 14.4 | 28,800 | 1,15,200 |
| TOTAL | 84,800 |
Conclusion:
MACRS depreciation is $ 84800.
ii.
Straight Line Depreciation.
Answer to Problem 43P
Straight Line Depreciation is $20000 per annum.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM depreciation =
| Year | Beginning-of-year Book Value ($) | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 20,000 | 1,80,000 |
| 2 | 1,80,000 | 20,000 | 1,60,000 |
| 3 | 1,60,000 | 20,000 | 1,40,000 |
| TOTAL | 60,000 |
Conclusion:
Straight Line Depreciation is $20000 per annum
iii.
Sum-of-years-digit depreciation.
Sum-of-years-digit depreciation is $98182.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
Sum-of-years-digit depreciation (SOYD)
Depreciation base = $200,000
Annual depreciation in year N =
| SOYD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 10/55 | 36,364 | 1,63,636 |
| 2 | 2,00,000 | 9/55 | 32,727 | 1,30,909 |
| 3 | 2,00,000 | 8/55 | 29,091 | 1,01,818 |
| TOTAL | 98,182 |
Conclusion:
Sum-of-years-digit depreciation is $98182.
iv.
Double declining balance depreciation.
Double declining balance depreciation is $ 97600.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM Depreciation rate =
DDB Rate =
| DDB | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.2 | 40,000 | 1,60,000 |
| 2 | 1,60,000 | 0.2 | 32,000 | 1,28,000 |
| 3 | 1,28,000 | 0.2 | 25,600 | 1,02,400 |
| TOTAL | 97,600 |
Conclusion:
Double declining balance depreciation is $ 97600
(e).
v.
150% Declining balance depreciation.
150% Declining balance depreciation is $77175.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15
| 150% DECLINING BALANCE METHOD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.15 | 30,000 | 1,70,000 |
| 2 | 1,70,000 | 0.15 | 25,500 | 1,44,500 |
| 3 | 1,44,500 | 0.15 | 21,675 | 1,22,825 |
| TOTAL | 77,175 |
Conclusion:
150% Declining balance depreciation is $77175.
iii.
Sum-of-years-digit depreciation.
Answer to Problem 43P
Sum-of-years-digit depreciation is $98182.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
Sum-of-years-digit depreciation (SOYD)
Depreciation base = $200,000
Annual depreciation in year N =
| SOYD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 10/55 | 36,364 | 1,63,636 |
| 2 | 2,00,000 | 9/55 | 32,727 | 1,30,909 |
| 3 | 2,00,000 | 8/55 | 29,091 | 1,01,818 |
| TOTAL | 98,182 |
Conclusion:
Sum-of-years-digit depreciation is $98182.
iv.
Double declining balance depreciation.
Double declining balance depreciation is $ 97600.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM Depreciation rate =
DDB Rate =
| DDB | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.2 | 40,000 | 1,60,000 |
| 2 | 1,60,000 | 0.2 | 32,000 | 1,28,000 |
| 3 | 1,28,000 | 0.2 | 25,600 | 1,02,400 |
| TOTAL | 97,600 |
Conclusion:
Double declining balance depreciation is $ 97600
(e).
v.
150% Declining balance depreciation.
150% Declining balance depreciation is $77175.
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15
| 150% DECLINING BALANCE METHOD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.15 | 30,000 | 1,70,000 |
| 2 | 1,70,000 | 0.15 | 25,500 | 1,44,500 |
| 3 | 1,44,500 | 0.15 | 21,675 | 1,22,825 |
| TOTAL | 77,175 |
Conclusion:
150% Declining balance depreciation is $77175.
iv.
Double declining balance depreciation.
Answer to Problem 43P
Double declining balance depreciation is $ 97600.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
SLM Depreciation rate =
DDB Rate =
| DDB | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.2 | 40,000 | 1,60,000 |
| 2 | 1,60,000 | 0.2 | 32,000 | 1,28,000 |
| 3 | 1,28,000 | 0.2 | 25,600 | 1,02,400 |
| TOTAL | 97,600 |
Conclusion:
Double declining balance depreciation is $ 97600
(e).
v.
150% Declining balance depreciation.
Answer to Problem 43P
150% Declining balance depreciation is $77175.
Explanation of Solution
Given:
Cost of machine = $200000
Useful Life = 10 years.
Calculation:
150% Declining balance depreciation rate = 0.1 x 1.5 = 0.15
| 150% DECLINING BALANCE METHOD | ||||
| Year | Depreciation Base ($) | Depreciation Rate | Annual Depreciation ($) | Year-end Book Value ($) |
| 1 | 2,00,000 | 0.15 | 30,000 | 1,70,000 |
| 2 | 1,70,000 | 0.15 | 25,500 | 1,44,500 |
| 3 | 1,44,500 | 0.15 | 21,675 | 1,22,825 |
| TOTAL | 77,175 |
Conclusion:
150% Declining balance depreciation is $77175.
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Chapter 11 Solutions
ENGR.ECONOMIC ANALYSIS
- Production efficiency is most concerned with Choice of inputs in production process Quantity of outputs resulting from the production process The technological process of production All of the abovearrow_forwardChoose all of the following that are assumed to be constant while constructing the production possibilities curve Technology Precise mix of inputs Institutional arrangements like judicial protection of business contracts Outputsarrow_forwardA point that lies OUTSIDE of the PPC can be achieved if A major technological innovation increases production efficiency A sudden influx of resources e.g., massive immigration of trained nurses Economic reform resulting in greater protection of intellectual property rights All of the above Only options 1 and 2arrow_forward
- The marginal benefit from each successive unit of medical care consumed declines BECAUSE each successive unit is more expensive to produce True Falsearrow_forwardIn the Human Capital approach, estimated monetary worth of life is MOST SENSITIVE to which key indicator Discount rate Social security payroll taxes Labour market earnings Workplace injury compensationarrow_forwardOver the last few decades out-of-pocket costs have formed a DECLINING proportion of total consumer expenditure on medical care True Falsearrow_forward
- Cost benefit analyses often assumes the following about consumers EXCEPT Consumers have clear preferences among choices they are exposed to Consumers purposely choose actions that result in higher satisfaction Consumers factor in uncertainty of outcomes in their decision-making regarding net benefits and costs Consumers lack information about attributes of market goods that are necessary for ranking their choice setarrow_forwardThe TRUE relationship between MARGINAL utility and an individual’s stock of health can be best described as a scatter plot True Falsearrow_forwardMany health economists believe that the United States spends its MARGINAL dollars on healthcare in a highly wasteful manner. This view is also known as “flat of the curve” medicine. True Falsearrow_forward
- Increasing provision of out-of-pocket cost calculators by major insurers are attempts to REDUCE price transparency for consumers True Falsearrow_forwardA price hike for medical goods/services that have an inelastic (i.e., <1) own-price elasticity of demand will tend to yield lower revenues True Falsearrow_forwardRisk Loving people are willing to pay insurance premiums that exceed their expected losses True Falsearrow_forward
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