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Your company purchases two machines, which cost $3,000 and $3,000, respectively. They have linear straight-line depreciation...
Your company purchases two machines, which cost $3,000 and $3,000, respectively. They have linear straight-line depreciation schedules of 8 and 4 years, respectively. What is the present value of the depreciation, given a cost of capital of 8.6%?
Solutions
Expert Solution
| Machine 1 | Machine 2 | |||||
| i | Cost | 3000 | 3000 | |||
| ii | Useful life | 8 | 4 | |||
| iii=i/ii | Annual depreciation | 375 | 750 | |||
| computation of present vlaue of depreciation | ||||||
| i | ii | iii | iv=i*iii | v=ii*iii | ||
| Year | Machine 1 | Machine 2 | PVIF @ 8.6% | present value machine 1 | present value machine 2 | |
| 1 | 375 | 750 | 0.9208 | 345.30 | 690.61 | |
| 2 | 375 | 750 | 0.8479 | 317.96 | 635.92 | |
| 3 | 375 | 750 | 0.7807 | 292.78 | 585.56 | |
| 4 | 375 | 750 | 0.7189 | 269.60 | 539.19 | |
| 5 | 375 | 0.6620 | 248.25 | - | ||
| 6 | 375 | 0.6096 | 228.59 | - | ||
| 7 | 375 | 0.5613 | 210.49 | - | ||
| 8 | 375 | 0.5168 | 193.82 | - | ||
| 2,106.77 | 2,451.28 | |||||
| Present vlaue of machine 1= | 2,106.77 | |||||
| Present vlaue of machine 2= | 2,451.28 | |||||
jeff jeffy answered 1 year agoRelated Solutions
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