Modified accelerated cost recovery system allows the capitalized cost of an asset to be recovered over a specified period via annual deductions. This method puts fixed assets into classes that have set depreciation period. A) True B) False
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- With reference to the straight-line depreciation method, which statement is false? (a) An equal amount of depreciation is allocated in each year. (b) The book value of the asset decrements by a fixed amount each year. (c) The depreciation life (n) is set based on the MACRS property classes. (d) The asset is depreciated down to a book value equal to the salvage value.All of the following statements about the Alternative Depreciation System (ADS) are true, except: (a) The half-year convention applies (b) Salvage value is neglected (c) The recovery periods are shorter than in GDS (d) The straight line method is requiredABC Corporation makes it a policy that for any new equipment purchased, the annual depreciation cost should not excess 20% of the first cost at any time with no salvage value. Determine the length of the service life necessary if the depreciation used is the SYD method.
- Peabody Corporation has the following base-case estimates for its new smallengine assembly project:• Price per un it= $500• Variable costs = $120 per unit• Fixed costs = $2.5 million• Demand = 20,000 units per year• Capital investment = $8 million a1 year 0• Product life = 8 years• Salvage value = $500,000• Depreciation method =seven-year MACRS• Tax rate= 35%• MARR = l2%Suppose the company believes that all of its estimates (except the product life, depreciation method, tax rale, and MARR) are accurate only 10 within ±20%.(a) What is the NPW of the project based on its base-case scenario?(b) What is the NPW of the project based on its best-case scenario?(c) What is the worst-case scenario?(d) What conclusion would you make about the project after seeing the scenario analyses?An asset is purchased for P9,000.00. Its estimated life is 10 years, after which it will be sold for P1,000.00. Find the book value during the third year if sum-of-the-year's digit (SOYD) depreciation is usedIdentify which of the following items are not included in the calculation of cash flow before taxes, CFBT: life of asset, operating expenses, salvage value, depreciation, initial investment, gross income, tax rate.
- ABC Corporation makes it a policy that for any new equipment purchased, the annual depreciation cost should not exceed 7% of the first cost at any time with no salvage value. Determine the length of service life necessary if the depreciation used is the SYD method. Draw the cashflow if necessaryChanveida finds a home listed for $48k. Similar homes in good condition sell for $60k (market value). She pays $35k. Closing costs are $2k, estimated fix-up is $7k, and holding costs are $3k. She ‘flips’ the property after 3 months for $58k. Her closing costs upon sale are 7% of the sell price. Her overall tax rate is 30%. Assume no financing is used and there is no depreciation taken. Determine the Adjusted Cost Basis. (Do not show a decimal or cents in your answer)The CFO of Axis Manufacturing is evaluating the introduction of a new product. The costs of a recently completed marketing study for the new product and the possible increase in the sales of a related product made by Axis are best described (respectively) as follows: a. Opportunity cost b. Depreciation cost c. Sunk cost
- Depreciation can be regarded as all the following except a. An accounting concept b. Decrease in value of an asset due to usage and time c. A cash deduction that is reinvested at the MARR d. A tax saving measure on financial statements After you have conducted a future worth comparison of alternatives, what factor do you multiply the FW values by in order to obtain the AW values of the alternatives? a. (F/A, i, n) b. (F/P, i, n) c. (A/P, i, n) d. (A/F, i, n)A machine costing P480,000 has a life expectancy of 12 years with a salvage value of 10% of the first cost. Using the Depreciation by Declining Balance Method (DBM) and Double Declining Balance Method (DDBM), what is the depreciation and book value of the machine after five years?Please solve using the DECLINING BALANCE METHOD (DBM) and DOUBLE DECLINING BALANCE METHOD (DDBM) to find its answer. Thank youABC Corporation makes its policy that for every new equipment purchased, the annual depreciation should not exceed 20% of the first cost at any time without salvage value. Determine the length of service if the depreciation used is the SOYD Method.