EGG 307: Engineering Economics Homework No. 9: Solutions Review the lecture notes and examples on depreciation and tax analysis and attempt the following two problems. Chapter 7 Problems 7-8 and 7-15 Notes : (1) For Problem 7-8(b) use the regular 200% declining balance method ( without switch to straight line). Note also that with the GDS and ADS methods, you use zero salvage value. (2) Problem 7-15 (i) Note that there are three cells, therefore the total cost of the cells is 3 x $500,000 and similarly, the total sale price after six years is 3 x $120,000. (ii) For part (d) of this problem, calculate the capital gain (defined here as “depreciation recapture”) from the sale of the cells (iii) Additional question: Part (e): If the cells are expected to generate annual net revenues of $100,000 each (total $300,000), compute the after-tax cash flows in each year over the six years of service life of the cells. Assume a tax rate of 35%. Present this in a nice table, similar to examples 7-17 and 7-18 in the text book. Note that the
This is the end of the preview.
access the rest of the document.