A&M Corporation purchased a vibratory finishing machine for $20,000 in year 0. The machine's useful life is 10 years at the end of which the machine is estimated to have a zero salvage value. The machine generates net annual revenues of $6,000. The annual operating and maintenance expenses are estimated to be $1,000. If A&M's MARR is 15%, how many years does it take before this machine becomes profitable?(a) 3 years <n:::; 4 years(b) 4 years <n :::; 5 years( c) 5 years <n :::; 6 years( d) 6 years <n :::; 7 years
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.
A&M Corporation purchased a vibratory finishing machine for $20,000 in year 0. The machine's useful life is 10 years at the end of which the machine is estimated to have a zero salvage value. The machine generates net annual revenues of $6,000. The annual operating and maintenance expenses are estimated to be $1,000. If A&M's MARR is 15%, how many years does it take before this machine becomes profitable?
(a) 3 years <n:::; 4 years
(b) 4 years <n :::; 5 years
( c) 5 years <n :::; 6 years
( d) 6 years <n :::; 7 years
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