The La Salle Bus Company has decided to purchase a new bus for $85000 with a...

The La Salle Bus Company has decided to purchase a new bus for $85000 with a trade-in of their old bus. The old bus has a BV of $10000 at the end of the trade in. The new bus will be kept for 9 years before being sold. Its estimated SV at that time is expected to be $5000. Answer to the questions 1-4 using information that is provided

1) Using the SL method, what is the Book value of the bus at the end of year 6?

2) Using the DB method, what is the Book value at the end of the year 6? (Assume 200% depreciation rate for the bus)

3) Assuming DB with switchover to SL method, at each year does the switch occur? (4,5,6,7,8,9, Switch Never happen)?

4) How much the depreciation would be after the switch to SL method happen?

Expert Solution

1) Using SL method, Book value of the bus at the end of year 6 is $(85000-53333) = $31667

Accumulated Depreciation is $ 53333

2) Using DB method Book value of the bus at the end of year 6 is $ 21953.25

Accumulated Depreciation is$ 63046.75

jeff jeffy answered 1 year ago

2. The La Salle Bus Company has decided to purchase a new bus for $95,000 with...

2. The La Salle Bus Company has decided to purchase a new bus for $95,000 with a trade-in of their old bus. The old bus has a BV of $10,000 at the time of the trade-in. The new bus will be kept for 10 years before being sold. Its estimated SV at that time is expected to be $15,000. a. Determine which asset class of the bus. b. Determine annual Straight-Line Depreciation charge.

ABC company has decided to purchase a new printing machine. This Machine has a 9-yer life...

ABC company has decided to purchase a new printing machine. This Machine has a 9-yer life and will cost 750,000 to install the new machine. Total operation costs of the machine per year is 10,000. Calculate the EAC, if the discount rate is 11.25%.

Leverage Analysis: Your employer has decided to purchase a new manufacturing line. The new line will generate an...

Leverage Analysis: Your employer has decided to purchase a new manufacturing line. The new line will generate an additional $3,000,000 of operating income annually and will cost $50,000,000. You are trying to decide if the line should be financed with debt or with equity. The company currently has $60,000,000 of debt (borrowing rate is 8%) and $30,000,000 of equity. (Part #1) Complete the income statement below (shaded region) including the two ratios at the bottom of the table. (Part #2) Recommend one of the...

) A public school district is investigating whether to purchase a new school bus to take...

) A public school district is investigating whether to purchase a new school bus to take over the rural-most route in the district. They have two options: A modern, eco-friendly bus complete with seat belts and air conditioning, will have a first cost of $95,000, cost savings (in terms of fuel efficiency and maintenance costs) of $20,000/year the first year, and decreasing by $1000 per year thereafter (so $19,000 the second year, 18,000 the third year, etc…). It’s estimated that...

1. You are the CFO of Ford Motors Inc. The firm has decided to purchase new...

1. You are the CFO of Ford Motors Inc. The firm has decided to purchase new fixed assets that will allow them to more efficiently produce electric cars. To raise the funds needed to purchase these assets, you decide to issue bonds. You expect the new fixed assets to last about 11 years so you’d like to issue bonds with a maturity of 11 years and a face value of $1,000. To set the coupon payment, you ask Moody’s what...

Wolf Corporation has decided to purchase a new machine that costs $4.5 million. The machine will...

Wolf Corporation has decided to purchase a new machine that costs $4.5 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 30%. The Sur Bank has offered Wolf a four-year loan for $4.5 million. The repayment schedule is four-yearly principal repayments of $1,125,000 and an interest charge of 7% on the outstanding balance of the loan at the beginning of each year. Both principal repayments and interest...

Liable Laboratory Inc, has decided to purchase a new UA analyzer. Cost of the analyzer is...

Liable Laboratory Inc, has decided to purchase a new UA analyzer. Cost of the analyzer is 125,750, shipping costs are 30,000 and installation costs are 5,000. The life of the analyzer is expected to be 5 years and the resell value is 15,000. Calculate the straight-line depreciation, double declining depreciation and sum of the years depreciation for each year of the useful life

Wolfson Corporation has decided to purchase a new machine that costs $2.6 million. The machine will...

Wolfson Corporation has decided to purchase a new machine that costs $2.6 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 22 percent. The Sur Bank has offered Wolfson a four-year loan for $2.6 million. The repayment schedule is four yearly principal repayments of $650,000 and an interest charge of 7 percent on the outstanding balance of the loan at the beginning of each year. Both principal...

Wolfson Corporation has decided to purchase a new machine that costs $4.1 million. The machine will...

Wolfson Corporation has decided to purchase a new machine that costs $4.1 million. The machine will be depreciated on a straight-line basis and will be worthless after four years. The corporate tax rate is 40 percent. The Sur Bank has offered Wolfson a four-year loan for $4.1 million. The repayment schedule is four yearly principal repayments of $1,025,000 and an interest charge of 7 percent on the outstanding balance of the loan at the beginning of each year. Both principal...

Veritas Inc. has decided to acquire a new Hydraulic Excavator. It has three options. Caterpillar: purchase...

Veritas Inc. has decided to acquire a new Hydraulic Excavator. It has three options. Caterpillar: purchase cost of $350,324 and operating costs of $21,964 per year (paid at the end of each year). John Deere: purchase cost of $285,068 and operating costs of $20,274 per year (paid at the end of each year). Volvo: purchase cost of $307,686 and operating costs of $15,767 per year (paid at the end of each year). Assume that Geek Inc. has a budget of...

Question