PS 13 - Depreciation and Income Taxes

PS 13 - Depreciation and Income Taxes - b) DB 100% Method...

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IE 150 Problem Set 13 Depreciation and Income Taxes Instructions:  Write/Type/Print your answers on yellow pad or bond paper (NO A4’s). Use a different sheet per  problem.  Use phrases  to describe what you are doing. Do not present it as just a series of equations and  numbers.  Label each step. Ex: “Step 1: Set-up the Total Revenue Equation”, “Step 4: Solve for the NPV”.  Box the final answers.  Use clear formatting: Indent at each step. Show your answers in just 1 column. (The problem set  will be read from top to bottom, and not top bottom diagonal right bottom.) Problem 1:  An asset with a useful life of 8 years was purchased for PhP 150,000. Depreciate the asset using:  a) Straight Line Method
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Unformatted text preview: b) DB 100% Method c) DB 150% Method d) DB 200% Method Problem 2: Why would you rather depreciate an asset earlier rather than later? Problem 3: Two alternative machines will produce the same product, but one is capable of higher quality work, which can be expected to return greater revenue. The following are the relevant data: A B First Cost ($) 20,000 30,000 Life (yrs) 12 8 Terminal BV ($) Market Value ($) 4,000 Annual Receipts ($) 150,000 188,000 Annual Expenses ($) 138,000 170,000 Determine the better alternative assuming repeatability and based on the SL depreciation at an income tax of 35%. Also assume that MARR (after tax) is 10%. (Show the tax tables)....
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