Show all answers in the space provided. (Answers only). Attach extra sheets to s
ID: 1713145 • Letter: S
Question
Show all answers in the space provided. (Answers only). Attach extra sheets to show your work with each question clearly identified. All sheets should include your name and class number. For the questions related to excel, print the solution with the problem number and your name on each sheet. Also put all solutions in one excel worksheet with a separate tab for each problem titled appropriately and upload your file to Blackboard. 1-6. The "Big.Deal" Company has purchased new furniture for their offices at a retail price of $100,000. An additional $20,000 has been charged for insurance, shipping, and handling. The company expects to use the furniture for 10 years (useful life 10 years) and then sell it at a salvage (market) value of $10,000. Use the SL method for depreciation to answer these questions. (7.3) a. what is the depreciation during the second year? a. da- b. What is the BV of the asset at the end of the firstyear? b. BV What is the BV of the asset after 10 years? c. d. Solve a, b, and c using the 200% DB method. a. d2 e. Solve a, b, and c using the MACRS method. a. dz b. Bv,- C. BV10 , f. Use EXCEL to create a single chart showing the Book Value (y-axis) versus the end-of-year (x-axis) for all three methods. Attach the chart to this sheet and upload the excel file to Blackboard as described above. A new machine is estimated to cost $200,000 and reduce net annual operating expenses by $36,000 for 10 years and have a market value of $30,000 at the end of the 10th year. Assume the firm is in the $335k-$10M taxable income bracket and the state tax rate is 6%. The machine is in the MACRS 7-year property class. The after-tax MARR is 10%/year. Prepare an excel file as described below. Attach the excel output and upload your file as described above. 2 Calculate the before-tax and after-tax IRR using Excel only. Calculate the after-tax PW using Excel. Also perform this step manually with financial notations and attach your calculations. Perform parts a and b using straight line depreciation for 10 years. Perform parts a and b using DDB depreciation until the BV reaches the salvage value. a. b. c. d. Page 1 of 1Explanation / Answer
1) Total cost of furniture = 100,000 + 20,000= $120,000
a) depreciation at the end of 2nd year d2 = ($120,000 - $10,000)/10 = $11,000
b) BV of the asset at the end of first year BV1= $120,000 - $11,000 = $109,000
c) BV of the asset at the after ten years BV10= $120,000-($11,000x10) = $10,000
D) USING 200% DB METHOD:
Divide 200% by the number of years in the asset life and then multiply by 2 to find the depreciation rate.
(200%)/10 =20%
depreciation rate after 2years = 2 x 20% =40%
a) In the first year, the depreciation will be = ($100,000 x 40%) = $40,000
For the second year, the depreciable cost is, = $100,000 - $40,000 = $60,000
therefore the annual depreciation will be = $60,000 x 40% = $24,000
b) BV of the asset at the end of first year BV1= $120,000 - $24,000 = $96,000
c) BV of the asset after 10 years BV10,
book vaue at start of 10th year becomes equal to $16,106. and the acumulated depreiation cost becomes $107,115. Hence the BV10 = $120,000-$107,115 = $12,885.
DEPRECIATION SCHEDULE HAS BEEN ATTACHED FOR THE REFERANCE.
MACRS METHOD:
This method adjusts for partial years using the IRS conventions. These conventions are built into the tables which the IRS provides for computing depreciation.
MACRS TABLE:
This method adjusts for partial years using the IRS conventionsfor half-year, mid-quarter, and mid-month. These conventions are built into the tables which the IRS provides for computing depreciation. For different periods it will e having differnt convnsion table for caculation of depreciation.
YEAR BV YEAR START DEPRECIATION % DEPRECIATION EXPENCE DEPRECIATION ACCUMULATED BV YEAR END 1 120,000 20% 24,000 24,000 96,000 2 96,000 20% 19,200 43,200 76,800 3 76,800 20% 15,360 58,560 61,440 4 61,440 20% 12,288 70,848 49,152 5 49,152 20% 9,830 80,678 39,322 6 39,322 20% 7,864 88,543 31,457 7 31,457 20% 6,291 94,834 25,166 8 25,166 20% 5,033 99,867 20,133 9 20,133 20% 4,027 103,894 16,106 10 16,106 20% 3,221 107,115 12,885