ClassHW_5 - Hw-5 Solutions1(7.8 Asset class 13.3Basis$60,000MV14$12,000N14R0.142857Class life14GDS recovery is 7 yearsADS recovery is 14 yearsSL

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Unformatted text preview: Hw-5 Solutions1. (7.8) Asset class 13.3Basis$60,000MV14$12,000N14R0.142857Class life14GDS recovery is 7 yearsADS recovery is 14 yearsSL MethodEOY, kdkBVk$60,0001$3,429$56,5712$3,429$53,1433$3,429$49,7144$3,429$46,2865$3,429$42,857200% DB method with switchover to SL methodDepreciation methodEOY, kBeginning BV200% DB methodSL methodAmount selected1$60,000$8,571.43$3,428.57$8,571.432$51,428.57$7,346.94$3,032.97$7,346.943$44,081.63$6,297.38$2,673.47$6,297.384$37,784.26$5,397.75$2,344.02$5,397.755$32,386.51$4,626.64$2,038.65$4,626.646$27,759.86$3,965.69$1,751.10$3,965.69GDSADSEOY, krkdkBVkEOY,kdkBVk$60,000$60,00010.1429$8,574$51,4261$2,143$57,85720.2449$14,694$36,7322$4,286$53,57130.1749$10,494$26,2383$4,286$49,28640.1249$7,494$18,7444$4,286$45,00050.0893$5,358$13,3865$4,286$40,7142. (7.15)a.Cost basis = 3 x $500,000 + $35,000 + $50,000 = $1,585,000b.Class life is 10 yearsc.d5= 0.0893 x 1,585,000 = $141,540.50d.Depreciation till EOY 6 = (0.1429 + 0.2449 + 0.1749 + 0.1249 + 0.0893 + 0.0892/2) x 1,585,000 = $1,302,077.50 BV6 = 1,585,000 – 1,302,077.5 = $282,922.50 Captured depreciation = (3 x 120,000) – 282,922.5 = $77,077.503. (7.32) Let xbe the annual production level. EOYBTCFDepreciationTaxable incomeIncome taxesATCF($500,000)($500,000)142.5x - 35000$100,00042.5x - 13500054000 - 17x25.5x + 19000242.5x - 3500042....
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This note was uploaded on 11/13/2011 for the course IE 343 taught by Professor Vincent,g during the Fall '08 term at Purdue University-West Lafayette.

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ClassHW_5 - Hw-5 Solutions1(7.8 Asset class 13.3Basis$60,000MV14$12,000N14R0.142857Class life14GDS recovery is 7 yearsADS recovery is 14 yearsSL

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