A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, of the shown Table . If the before-tax MARR is 10% per year, how long should the asset be retained in service? Solve by hand and by spreadsheet. By how much would the MARR have to change before the economic life decreases by one year? How about to increase the economic life by one year? TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)(4)Cost of(3)Loss in Market Capital = 10%Value (MV)(6)[= (3) + (4) + (5)]Total (Marginal)Cost for Year(5)Annual(7)EUACa(1)End of MV, EndYear, k of Year k during Year k(2)of Beginningof Year MVthroughYear kExpenses(Ek)(TCk)$30,000122,500$7,500$3,000$3,000$13,500$13,500216,8755,6252,2504,50012,37512,964312,7504,1251,6887,00012,81312,918 N* = 349,7503,0001,27510,00014,27513,21157,1252,62597513,00016,60013,766[EL, TG(P|F, 10%.j)](4/P,10%, k)a EUACK =-j=1(A/P,

Given: 1 2 3 4 5 End of Year, k MV, end of the year, k Loss in MV in year k Cost of…

TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (3) Loss in Market Capital = 10% Value (MV) (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (5) Annual (7) EUACa (1) End of MV, End Year, k of Year k during Year k (2) of Beginning of Year MV through Year k Expenses (Ek) (TCk) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,750 4,125 1,688 7,000 12,813 12,918 N* = 3 4 9,750 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 [EL, TG(P|F, 10%.j)](4/P,10%, k) a EUACK = -j=1 (A/P,

TABLE 9-2 Determination of the Economic Life, N, of a New Asset (Example 9-4) (4) Cost of (3) Loss in Market Capital = 10% Value (MV) (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (5) Annual (7) EUACa (1) End of MV, End Year, k of Year k during Year k (2) of Beginning of Year MV through Year k Expenses (Ek) (TCk) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,750 4,125 1,688 7,000 12,813 12,918 N = 3 4 9,750 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 [EL, TG(P|F, 10%.j)](4/P,10%, k) a EUACK = -j=1 (A/P,

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.2.1MBA

See similar textbooks

Similar questions

7) Consider the following information: Asset Cost $56,000Salvage value 1,000Life 10 yearsDepreciation method Straight Line a. What is the depreciation in year 3? b. What would the depreciation in year 4 be if at the beginning of the year we think that the total asset life will be only 8 years instead of 10 years?
5. The original investment in a project was $64,197. The project has a life of ten years and the company requires a 10% rate of return on all investments. The annual net income was $24,464.1. $ 10,379 was the depreciation expense. What is the project's profitability index rounded to two decimal places?
A return on assets of 5.15% means that a company is earning: a.a $5.15 return on every $100 invested in long-term assets. b.a $5.15 return on every $100 of total assets. c.a $5.15 return on every $100 of assets minus liabilities. d.a $5.15 return on every $100 of current assets.
Question 4 Below is the information for an anonymous company. Initial Investment $1,680,000 Usuefull life 10 years Salvage Value $140,000 Annual Net Income Generated $164,640 Cost of Capital 15%. Please solve for the payback period Accounting Rate of Return And complete the attached table with the correct answers.
1.How much should be CREDITED (Debited) Retained Earnings as realization of Revaluation Surplus (Revaluation Loss) NEXT YEAR? 2. How much gain(loss) on sale to recognized if the equipment is sold for P8,000,000 ONE YEAR AFTER REVALUATION?
Service Output MethodGiven:FC = 800,000.00 pesosSV = 200,000.00 pesosn = 5 yearsOutput in year 1 = 300 unitsTotal output in 5 yrs = 1000 unitsa. Depreciation per unit = ?b. Book Value at year 1= ?
(5) The amount of the average investment for a proposed investment of $172,000 in a fixed asset with a useful life of 4 years, straight-line depreciation, no residual value, and an expected total net income of $28,300 for the 4 years is?
4. How much must be invested today, at 8% APR semi-annually compounded, to accumulate enough to retire $10,000 debt due seven years from today? The amount that must be invested today is closest to: A. $5,774. B. $5,835. C. $5,923. D.$6,794 13. Both real and financial assets have four principal attributes that are significant factors in the investment decision process. These are: I. liquidity II. capital gain III. risk IV. return or yield V. time pattern of future cash flows VI. price and cash flow volatility A. I, III, IV, V B. I, II, III, IV C. I, III, IV, VI D. II, III, IV, V
25 A machine costs R20 000. Depreciation will be written off at 20% per annum. Which one of the following amounts shows its carrying amount after 4 years if the reducing balance method is used? A. R9 030 B. R8 192 C. R8 256 D. R8 524
Required:An asset that you hold has a value at the start of the year of 200. After six months it has increased invalue to 600, and after another six months has fallen in value back to 200.Required:Please calculate the annualised arithmetic return and the annualised geometric return of this asset.
Problem 9-07 A firm has earnings of $25,000 before interest, depreciation, and taxes. A new piece of equipment is installed at a cost of $13,000. The equipment will be depreciated over five years, and the firm pays 15 percent of its earnings in taxes. What are the earnings and cash flows for the firm in years 2 and 5, using the two methods of depreciation? Use Exhibit 9.4to answer the questions. Round your answers to the nearest dollar. Modified Accelerated Straight-line Cost Recovery Year 2 Year 5 Year 2 Year 5 Earnings before depreciation and taxes $ $ $ $ Depreciation expense Earnings after depreciation Taxes (15% tax rate) Net earnings $ $ $ $ Cash flow $ $ $ $
Ch 6. Seeing Red has a new project that will require fixed assets of $935,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, and 11.52 percent, respectively. The company has a tax rate of 28 percent. What is the depreciation tax shield for Year 3? Round to the nearest cent and format answer as "XX,XXX.XX"