Question
In: Economics
A device can be purchased now for $20,000 and depreciated by 5-year SL depreciation and zero...
A device can be purchased now for $20,000 and depreciated by 5-year SL depreciation and zero salvage value. The net benefit from the device, before deducting depreciation, is $9,000 per year. After 2 years, the device will not be needed and can be sold. During the 2-year period, inflation rate is 6%/yr. The company has a 50% combined federal and state tax rate. If it requires a real 10% after-tax rate of return, what should be the selling price of the device after 2-year usage? (Not done in Excel)
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
A device can be purchased now for $20,000 and depreciated by 5-year SL depreciation and zero...
A device can be purchased now for $20,000 and depreciated by
5-year SL depreciation and zero salvage value. The net benefit from
the device, before deducting depreciation, is $9,000 per year.
After 2 years, the device will not be needed and can be sold.
During the 2-year period, inflation rate is 6%/yr. The
company has a 50% combined federal and state tax rate. If it
requires a real 10% after-tax rate of return, what should be the
selling price of the...
A device can be purchased now for $20,000 and depreciated by 5-year SL depreciation and zero...
A device can be purchased now for $20,000 and depreciated by
5-year SL depreciation and zero salvage value. The net benefit from
the device, before deducting depreciation, is $9,000 per year.
After 2 years, the device will not be needed and can be sold.
During the 2-year period, inflation rate is 6%/yr. The company has
a 50% combined federal and state tax rate. If it requires a real
10% after-tax rate of return, what should be the selling price of...
A small research device can be purchased for $50,000 and depreciated by MACRS (check the property...
A small research device can be purchased for $50,000 and
depreciated by MACRS (check the property class). The net benefits
from the device, before deducting depreciation, are $7,000 at the
end of the first year and increasing $3,500 after that (second year
equals $10,500, third year equals $14,000, etc.) until the device
is hauled to the junkyard at the end of seven years. During the
seven-year period, there will be an inflation rate (f) of 3%. The
profitable corporation has...
Compute Straight Line Depreciation for the Truck: Purchased July 1, $20,000 cost, $2,000 salvage value, 5...
Compute Straight Line Depreciation for the Truck: Purchased
July 1, $20,000 cost, $2,000 salvage value, 5 years useful
life
Depreciation
Calculation:
Depre. Exp. = cost – salvage value* (time in
service)
useful life
2018 Depreciation: $20,000-2000*(6/12) = $1,800
5 years
2019 Depreciation:
2020 Depreciation:
2021 Depreciation:
2022 Depreciation:
2023 Depreciation:
The journal entry to record the Depreciation Expense for Year 1
is:
Date
Accounts
Debit
Credit
12/31/18
Depreciation Expense - Truck
$1,800
Accumulated Deprec. -
Truck...
1) You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year...
1) You purchased a machine for $500,000 (installed), and you
depreciated it using a 5 year MACRS. This machine generates
$200,000 in annual revenue. In year 4, you sold the machine for
$250,000. You received a loan for $400,000 on a 5 year loan at 5%
(note, you must pay the remaining balance of this loan at the end
of year 4 from the proceeds of the sale). In addition, you invested
$80,000 in working capital initially. Your company is...
You purchased a machine for $500,000 (installed), and you depreciated it using a 5 year MACRS....
You purchased a machine for $500,000 (installed), and you
depreciated it using a 5 year MACRS. This machine generates
$200,000 in annual revenue. In year 4, you sold the machine for
$250,000. You received a loan for $400,000 on a 5 year loan at 5%
(note, you must pay the remaining balance of this loan at the end
of year 4 from the proceeds of the sale). In addition, you invested
$80,000 in working capital initially. Your company is in...
The new equipment will cost $400,000. It would be depreciated to zero using straight-line depreciation over...
The new equipment will cost $400,000. It would be depreciated to
zero using straight-line depreciation over a 5-year period. The
estimated salvage value is $100,000 at the end of the project. The
initial requirement in net working capital is $55,000, all of which
will be recouped at the end of the project. The projected operating
cash flows are $155,500 per year. The tax rate is 30%. What is the
internal rate of return on this 5-year project? Group of answer...
Denver Inc purchased a 5 year asset in November for $20,000. This is the only asset...
Denver Inc purchased a 5 year asset in November for $20,000.
This is the only asset the company placed in service during that
year. Neither the straight line method nor the 150% declining
balance method was elected. The company elects out of bonus
depreciation an the Section 179 expense deduction. Denver Inc sold
the asset in September of Year 3. What is the depreciation in the
year of sale? A. $2,350, B. $2,850, C. $3,250, D. $3,450
Year cost to be depreciated depreciation exp. per year Accumulated depreciation net remaining undepreciated cost 1...
Year
cost to be depreciated
depreciation exp. per year
Accumulated depreciation
net remaining undepreciated cost
1
2
3
4
5
6
7
8
9
10
Complete the following: Depreciation expense per year,
accumulated depreciation year, and net remaining undepreciated
cost.
Assumptions are as follows:
Cost to be depreciated: 20,000 Estimated useful life of
equipment: 10 years Year
Depreciation Tax Shields Lincoln Company has purchased equipment for $800,000. After it is fully depreciated, the...
Depreciation Tax Shields Lincoln Company has purchased equipment
for $800,000. After it is fully depreciated, the equipment will
have no salvage value. Lincoln may select either of the following
depreciation schedules for tax purposes: Option 1 Option 2 Year
Depreciation Depreciation 1 $160,000 $80,000 2 256,000 160,000 3
153,600 160,000 4 92,160 160,000 5 92,160 160,000 6 46,080 80,000
Assuming a 40% tax rate and a 12% desired annual return, compute
the total present value of the tax savings provided...
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