A firm is considering purchasing two assets. Asset L will have a useful life of 20 years and cost $5 million; it will have installation costs of $1 million but no salvage or residual value
Asset S will have a useful life of 8 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000. Which asset will have a greater annual straight-line depreciation?
A) Asset L has $12,500 more in depreciation per year.
B) Asset L has $37,500 more in depreciation per year.
C) Asset S has $12,500 more in depreciation per year.
D) Asset S has $37,500 more in depreciation per year.
Answer: B
Explanation: B) Annual depreciation for Asset L = (Asset Cost + Installation Cost - Salvage Value) / Useful Life = ($5 million + $1 million - 0) / 20 years = $300,000 per year.
Annual depreciation for Asset S = (Asset Cost + Installation Cost - Salvage Value) / Useful Life
= ($2 million + $0.50 million - $0.4 million) / 8 years = $262,500 per year.
Thus, Asset L has $300,000 -$262,500 = $37,500 more in depreciation per year.
You might also like to view...
A sales forecast is the typical indicator of
A. market adequacy. B. market potential. C. unmet needs. D. opportunities and threats.
__________ describes the set of rules nations have agreed to follow to help set the context for stable relationships among nations.
Fill in the blank(s) with the appropriate word(s).
The ________ program allows U.S. employers who meet specific regulatory requirements to bring foreign nationals to the United States to fill ________ jobs
A) A1-A; manufacturing B) H-2A; agricultural C) A1-A; food service D) H-2A; construction
In order to estimate the average time spent per studentĀ on the computer terminals at a local university, data were collected for a sample of 64 business students over a one-week period. Assume the population standard deviation is 1.6 hours. With a .95 probability, the margin of error is approximately
A. .392. B. 1.96. C. .20. D. 1.645.