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IE343_HW9_Solutions

# IE343_HW9_Solutions - Homework 9 Solutions PURDUE...

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Homework # 9 Solutions PURDUE UNIVERSITY Homework Assignment #9 IE 343: Engineering Economics Assigned: 05 Nov 2010 Fall 2010 Due: 12 Nov 2010 Instructor: A. Capponi Missing name on the top of each page submitted 2 Not stapled together 2 Not completed on the correct template 10 Problem 1 (10 points) Consider a 3-year MACRS property asset with an installed cost basis of \$100. Develop the MACRS percentage rates, r k , for the asset based on the underlying depreciation methods. (Hint: you may want to follow the example shown in class and use Table 7.3 to confirm your answer.) Since it is a 3 year property, then we use the 200% DB method with switch to SL at the optimal point. Salvage value is zero, thus the entire cost basis of \$100 is depreciated. R = 2/3 Yr DDB SL MACRS r t (% ) Cum Depreciation(%) 1 ( ) ( ) 33.33 (DDB) 33.33 2 ( ) ( ) 44.44 (DDB) 77.78 3 ( ) ( ) 14.81 (either) 92.59 4 ( ) 7.4074 (SL) 100

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Homework # 9 Solutions Problem 2 (10 points) Hoppy Hops, Inc. purchased hop harvesting machinery for \$150,000 four years ago. Due to a change in the method of harvesting, the machine was recently sold for \$37,500. Assume a 5 year
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IE343_HW9_Solutions - Homework 9 Solutions PURDUE...

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