A firm is considering purchasing an asset that will have a useful life of 10 years and cost $5 million; it will have installation costs of $500,000 and a salvage or residual value of $500,000. What is the annual straight-line depreciation for this asset?
A) $400,000 per year
B) $500,000 per year
C) $600,000 per year
D) $700,000 per year
Answer: B
Explanation: B) Annual depreciation for Asset = (Asset Cost + Installation Cost - Salvage Value) /
Useful Life = ($5 million + $0.5 million - $0.5 million) / 10 years = $500,000 per year.
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