Agranary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying One conveyor can be purchased and installed for $80,000 with $2,500 salvage value after 16 years. The other can be purchased and installed for $105,000 with $2,500 salvage value after 16 years. Operation and maintenance for each is expected to be $17,500 and $11,500 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 25%, and has a MARR of 9% after taxes. Click here to access the TVM Factor Table Calculator Click here to access the MACRS-GDS table. Part a Determine which alternative is less costly, based upon comparison of after-tax annual worth Alternative 1 Show the AW values used to make your decision: Alternative 2 Conveyor 1:$ Conveyor 2:$ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is 10
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.
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