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# Use the table below to answer this question. MACRS 5-year property Year Rate 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.

Need help with a few questions real quick-

1. Use the table below to answer this question.

MACRS 5-year property
Year Rate
1 20.00%
2 32.00%
3 19.20%
4 11.52%
5 11.52%
6 5.76%

Sun Lee's Furniture just purchased some fixed assets classified as 5-year property for MACRS. The assets cost \$56,000. What is the amount of the depreciation expense for the second year?
\$11,200
\$6,451
\$5,600
\$17,920
\$8,960

2. A project is expected to create operating cash flows of \$30,500 a year for three years. The initial cost of the fixed assets is \$63,000. These assets will be worthless at the end of the project. An additional \$2,000 of net working capital will be required throughout the life of the project. What is the project's net present value if the required rate of return is 14 percent?
\$2,178.57
\$5,809.78
\$5,159.72
\$9,159.72
\$7,159.72

3. Thornley Machines is considering a 3-year project with an initial cost of \$960,000. The project will not directly produce any sales but will reduce operating costs by \$500,000 a year. The equipment is depreciated straight-line to a zero book value over the life of the project. At the end of the project the equipment will be sold for an estimated \$143,000. The tax rate is 34 percent. The project will require \$26,000 in extra inventory for spare parts and accessories. Should this project be implemented if Thornley's requires a rate of return of 14 percent? Why or why not?
no; The NPV is \$139,985.20
yes; The NPV is \$22,572.46
yes; The NPV is \$230,957.13
yes; The NPV is \$113,985.20
yes; The NPV is \$154,980.00

4. Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of \$670,000. The lot was recently appraised at \$697,000. At the time of the purchase, the company spent \$33,000 to grade the lot and another \$4,100 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at \$1,200,000. What amount should be used as the initial cash flow for this building project?
\$1,900,300
\$1,904,400
\$1,877,400
\$1,870,000
\$1,897,000

SOLUTION 1:
Depreciation Expense = Depreciation Rate * Cost of Asset
Depreciation Expense = 32% * \$56,000
Depreciation Expense \$17,920.00 SOLUTION 2:
Year Cash Flows 0
1
2
3 \$(65,000.00)...

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