An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Compute the depreciation amount in the third year and the BV at the end of the fifth year of life be each of these methods. a. The SL method. b. The 200% DB method with switchover to SL. c. The GDS. d. The ADS
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- An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000, and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Double declining balance method is used to calculate the depreciation cost. a. What is the book value of the asset at the end of 5 years? b. What is the depreciation amount in the third year?uppose that you purchased a HVAC system five years ago for $75, 000. The O&Mcosts are $15, 000 this year and are expected to increase by $1, 000 each year for the next five yearsthen remain the same for the following years.The current salvage value of the system is $15, 000; salvage value after one year is estimated tobe $12, 000; after two years, $11, 000; after three years, $10, 000; after four years, $9, 000; and so on.A new industrial HVAC system is available for purchase at a price of $95, 000, including instal-lation. The market value of the new system will decrease at a rate of 15% each year. The O&Mcosts are expected to be $1, 000 in the first year, and will increase at a rate of 20% each year. Themaximum service life of the new system is 10 years. Assume that your company uses an interestrate of 10% for all project evaluations.(a) Find the remaining economic life of the currently owned asset.(b) What is the economic service life of the new system?(c) Use the…You are evaluating two different silicon wafer milling machines. The Techron | costs $264,000, has a 3-year life, and has pretax operating costs of $71,000 per year. The Techron Il costs $460,000, has a 5-year life, and has pretax operating costs of $44,000 per year. For both milling machines, use straight-line depreciation to zero over the project's life and assume a salvage value of $48,000. If your tax rate is 22 percent and your discount rate is 12 percent, compute the EAC for both machines. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) > Answer is complete but not entirely correct. Techron I $ -134,840.83 Techron II $ -107,570.18
- New equipment to read 96-bit product codes thatare replacing old bar codes has just been purchasedby General Food Stores. As a trial, 1000 of theitems will be initially purchased. For book depreciation purposes (not tax), the total investmentof $50,000 will be written off over a 4-yearperiod, with no salvage value, by applying one ofthree methodsSL, 1.75% DB, or DDB. The objectiveis to have the largest amount of accumulateddepreciation after 2 years, in order to minimizethe lost depreciation if it is again necessary topurchase new-technology readers prior to the end ofthe 4-year useful life of the readers just purchased.You know that the answer is the DDB method, butyou must graphically demonstrate this result to yoursupervisor. Use a spreadsheet to do so.A. When the price =50000-500(Demand) and the variable cost-$3000 per unit, the value of demand that maximize the profit B. The installation cost of a machine is $10000 with estimated life of 10 years and selvage value of $2000 at the end of the 10th year. What will be the annual depreciation cost in the fourth year (using straight line method)? C. Suppose that the initial cost of a certain operation is $25000 at the beginning of the first year. The expenditures are expected to be ($1500) at the end of the first year, $1000 at the end of second year, and to increase by $500 at the end of each of the next 4 years. The salvage value at the end of the 8th year is $1500. Draw the cash flow diagram. D. The Present worth (PW) of 5 annual payment of $10000 paid at the end of the each of the 5 years with interest rate of % 16 compounded quarterly is. E. The Future worth at the end of the 4 years (FW4) of the four $2000 annual payment paid at the beginning of each of the 4 years (shown in Figure…7 A fixed asset costing $80,000 and having an estimated salvage value of $6000 has a life expectancy of 10 years. Compare the results of Double declining, Sum of the year digits depreciation methods by filling in below columns: Sum of the year's Digits method: Year Depreciation Expense Accumulated Depreciation Book value End of the year 1 2 3 4 Double Declining Method: Year Depreciation Expense Accumulated Depreciation Book value End of the year 1 2 3 4
- Ella Ltd recently started to manufacture and sell productDG. The variable cost of product DG is £4 per unit and the totalweekly fixed costs are £18 000.The company has set the initial selling price of product DG byadding a mark up of 40 per cent to its total unit cost. It has assumedthat production and sales will be 3000 units per week.The company holds no stocks of product DG.Required:(a) Calculate for product DG:(i) the initial selling price per unit; and(ii) the resultant weekly profit. The management accountant has established that alinear relationship between the unit selling price (P in £)and the weekly demand (Q in units) for product DG isgiven by:P = 20 - 0:002QThe marginal revenue (MR in £ per unit) is related to weeklydemand (Q in units) by the equation:MR = 20 - 0:004Q(b) Calculate the selling price per unit for product DG that shouldbe set in order to maximize weekly profit. (c) Distinguish briefly between penetration and skimming pricingpolicies when launching a new…Gillespie Gold Products, Inc., is considering the purchase of new smelting equipment. The newequipment 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$4000. a. Determine the ATCF using a tax rate of 42% and straight-line method of depreciation.b. If the average yearly inflation rate for the 5-year study period is 3.5%, what is the real-dollar ATCF that is equivalent to the actual-dollar ATCF? The base time period is year zero (b=0).e quanty or capital per e, an increase in the depreciation rate will the curve (n+d)k, and will n, szt (k). Therefore, quantity of capital id output per worker will epreciation rate will make it to bu current savings to keep not affect cause a movement down shift to the right cause a movement up shift to the left
- What will be the cost of an asset, if its salvage value is 300 after 5 years and annual depreciation charge is 500, use the Straight Line Depreciation rule. Select one: a. 2800$ b. 2750$ c. 2840$Electronic Games is moving very quickly to introduce a new interrelated set of video games. The initial investment for equipment to produce the necessary electronic components is $9 million. The salvage value after 6 years is $700,000. Anticipated net contribution to income is $6 million the first year, decreasing by $1 million each year for 6 years, with all dollar amounts expressed in real dollars. Depreciation follows MACRS 5-year property, taxes are 40 percent, the real MARR is 18 percent, and inflation is 4 percent. g. Determine the real IRR of the after-tax cash flows. h. Determine the real ERR of the after-tax cash flows.7. An asset has an initial cost of $80,000, a salvage value of $10,000, and a depreciation life of 8 years. a) Determine the book value for year 3 using straight-line depreciation. b) Determine the depreciation for year 3 using double declining balance depreciation. Determine the equivalent annual capital recovery_plus a return of 10% for year 3, assuming double declining balance depreciation. c)