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Makovka662 [10]
3 years ago
11

g Texas Corporation purchases a piece of equipment on January 1 for $300,000 and the equipment has an expected useful life of te

n years. Its salvage value is estimated to be $20,000. Assuming Texas uses the double-declining balance depreciation method, what would be the accumulated depreciation at the end of the second year
Business
1 answer:
Vikki [24]3 years ago
6 0

Answer:

$108,000

Explanation:

For computing the accumulated depreciation for the end of the second year

First we have to find the depreciation rate which is shown below:

= One ÷ useful life

= 1 ÷ 10

= 10

Now the rate is double So, 20%

In year 1, the original cost is $300,000, so the depreciation is $60,000 after applying the 20% depreciation rate

And, in year 2, the depreciation is

=($300,000 - $60,000) × 20% = $48,000

So, the accumulated depreciation at the end of the second year is

= $60,000 + $48,000

= $108,000

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According to the Federal Deposit Insurance Corporation, the limit to the amount a person can be insured for is, $250,000 per depositor, per insured bank.

That means that Tony's account at a balance of $120,712 is covered completely as it is well below $250,000.

Their Joint account is also completely covered at $60,099.

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Which of the following caused a recession in the years immediately following World War II? A surge in investment spending. Pent-
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Armstrong industries has a contribution margin of $300,000 and a contribution margin ratio of 30%. how much are total variable c
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3 years ago
Your neighborhood self-service laundry is for sale and you consider investing in this business. For the business alone and no ot
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Answer:

  • The complete present value calcuation is below.

  • The net present value of this project is: $77,930.58 (assuming a value for the sale of the business equal to the purchase price).

Explanation:

For this problem, the first and basic question is:

  • <em>Prepare a net present value calculation for this project. What is the net present value of this project?</em>

<em />

<h2>Solution</h2>

The net present value is equal to: the present value of the future cash flows less present value of the investements.

<u>1. Present value of the future cash flows:</u>

The discount factor is equal to 1 / [1 + (1 + r)ⁿ]

Where:

  • r = 5% = 0.05
  • n = the number of year

Year     Cash flow     Discount factor     Present value

1            $30,000       1/(1 + 0.05)             $30,000/1.05 = $28,571.43

2           $30,000       1/(1 + 0.05)²           $30,000/(1.05)² = $27,210.88

3           $30,000       1/(1 + 0.05)³           $30,000/(1.05)³ = $25,915.13

4           $30,000       1/(1 + 0.05)⁴           $30,000/(1.05)⁴ = $24,681.07

5           $30,000       1/(1 + 0.05)⁵           $30,000/(1.05)⁵ = $23,505.78

5           $240,000*   1/(1 + 0.05)⁵           $240,000/(1.05)⁵ = $188,046.28

*For the year 5 you must also consider the value of the business, which is unknow. You should have some information about it. Although unrealistic, at this stage we can just assume a value: let's say it is the same purchase price: $240,000. That is what the last line shows:

The discount the value of the value of the business is:

  • $240,000 / (1.05)⁵ = $188,046.28

The total present value of the future cash flows is the sum of the present values of all the cash flows:

$28,571.43 + $27,210.88 + $25,915.13 + $24,681.07 + $23,505.78 + $188,046.28 = $317,930.58

<u>2. Calculate the net present value:</u>

  • Net present value =

                     = Total present value of future cash flows - investment

  • Net present value = $317,930.58 - $240,000 = $77,930.58
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