Question

Your company is considering an investment that would involve the following initial outlays: cost of equipment: $275467, installation: $28020, and change in NOWC: $37216. The equipment is classified to be depreciated according to the MACRS 3-year table, with the following depreciation schedule: year 1 = 33%, year 2 = 45%, year 3 = 15%, year 4 = 7%. What is the depreciation expense in year 2?

Answer 1

Cost of Equipment	$ 275,467.00
Installation cost	$    28,020.00
Total cost of Equipment	$ 303,487.00
Year	Cost =(A)	Depreciation Rate=(B)	Depreciation expense=(C )=(A)*(B)
Year 1	$ 303,487.00	33%	$                                              100,150.71
Year 2	$ 303,487.00	45%	$                                              136,569.15
Year 3	$ 303,487.00	15%	$                                                45,523.05
Year 4	$ 303,487.00	7%	$                                                21,244.09
DepreciationExpense in Year 2=		$                   136,569.15
Note: NOWC (Net Operating working capital) is not the part of cost of Assets it is the difference
between Current Assets-Current Liabilities.