The manager of a plant that manufactures stepper drives knows that Modified Accelerated Cost Recovery System (MACRS) and Double Declining Balance (DDB) are both accelerated depreciation methods, but out of curiosity, he wants to determine which one offers faster write-off in the first 3 years for equipment that has a first cost of $500,000, a 5-year life/recovery period, and a $40,000 salvage value. Determine which method provides a faster write-off for 3 years (i.e., yields lower book-value in year 3) and by how much? (Note: Use GDS 5-year recovery period for MACRS) O DDB provides faster write-off for 3 years (i.e., DDB provides lower book value in year 3) and difference in book values is $56,400 MACRS provides faster write-off for 3 years (i.e., MACRS provides lower book value in year 3) and difference in book values is $56,400 None of the above DDB provides faster write-off for 3 years (i.e., DDB provides lower book value in year 3) and difference in book values is $71,600 O MACRS provides faster write-off for 3 years (i.e., MACRS provides lower book value in year 3) and difference in book values is $71,600
The manager of a plant that manufactures stepper drives knows that Modified Accelerated Cost Recovery System (MACRS) and Double Declining Balance (DDB) are both accelerated depreciation methods, but out of curiosity, he wants to determine which one offers faster write-off in the first 3 years for equipment that has a first cost of $500,000, a 5-year life/recovery period, and a $40,000 salvage value. Determine which method provides a faster write-off for 3 years (i.e., yields lower book-value in year 3) and by how much? (Note: Use GDS 5-year recovery period for MACRS) O DDB provides faster write-off for 3 years (i.e., DDB provides lower book value in year 3) and difference in book values is $56,400 MACRS provides faster write-off for 3 years (i.e., MACRS provides lower book value in year 3) and difference in book values is $56,400 None of the above DDB provides faster write-off for 3 years (i.e., DDB provides lower book value in year 3) and difference in book values is $71,600 O MACRS provides faster write-off for 3 years (i.e., MACRS provides lower book value in year 3) and difference in book values is $71,600
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: St. Johns River Shipyards welding machine is 15 years old, fully depreciated, and has no salvage...
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