The annual depreciation schedule. Introduction: MACRS depreciation method: MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods. Depreciation schedule: A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

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Answer 1

Question

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

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Answer 2

Question

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

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Answer 3

Question

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

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Answer 4

Question

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

Answer 6

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

Answer 7

Chapter 12, Problem 32P

a.

Summary Introduction

To prepare: The annual depreciation schedule.

Introduction:

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Depreciation schedule:

A table that shows the amount of depreciation of a particular asset over the years of its usage is termed as depreciation schedule.

Answer 8

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

Answer 9

b.

Summary Introduction

To calculate: The annual cash flow including the working capital recovered in 6th year.

Introduction:

Cash flow:

The amount of cash and its equivalents that are transferred into and out of a business is termed as cash flows.

Working capital:

A measurement that helps a company to find its liquidity is termed as working capital. It is the difference between the current assets and current liabilities of a company.

Answer 10

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

Answer 11

c.

Summary Introduction

To calculate: The weighted average cost of the capital.

Introduction:

Weighted average cost of capital (WACC):

It is defined as the rate at which a company needs to pay on average to all its shareholders in return for financing its assets. This WACC is primarily referred to as the cost of capital of the firm.

Answer 12

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

Answer 13

d.

Summary Introduction

To calculate: The NPV of the investment and whether the purchase of the new equipment by the Data-Point Engineering should be made or not.

Introduction:

Net present value (NPV):

It is the difference between the PV (present value) of cash inflows and the PV of cash outflows. It is used in capital budgeting and planning of investment to assess the benefits and losses of any project or investment.

Answer 14

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Answer 16

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Answer 17

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Solution Summary: The author explains the MACRS depreciation method and the formula used for the calculation of the WACC.

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