Air Destinations issues bonds due in 10 years with a stated interest rate of 11% and a face value of $500,000. Interest payments
1 answer:
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Answer:
Please refer explanation and tables attached
Explanation:
1. Double-declining balance Method:
This is where the asset's value is depreciated at twice the rate than the straight line method. The depreciation amounts would be higher in the early years of the asset's life and gradually reduce towards the end. Hence, it does not mean that the depreciation amount would be higher than the straight line basis.
Straight Line depreciation per year = 1/6* x 100 = 16.67%
*as it is useful for six years
Hence double-depreciation value = 16.67% x 2 = 33.34%
It is calculated as depreciation rate x book value of asset at the beginning of the period.
Please refer attached table one for all years depreciation.
2. Activity based depreciation is whereby an asset is depreciated based on the asset’s activity such as the number of hours worked or the number of units produced, during a particular period of time. Activity based depreciation per year is calculated as:
[(Cost - Salvage value) x activity performed during the period] / Total estimated life activity of the asset
Please refer attached table two for all years depreciation.
Answer:
(C) 18,844.47
Explanation:
You need to use the Inflation-Adjusted Return formula:
So, basically you need to calculate it year by year. You can use excel, or an online calculator. I will attached you a link where you can find a good one. But this would be the process
And so on...
Keep in mind that I did not write all decimals. You need to consider them if you want an exact answer
Online calculator:
https://www.ameriprise.com/research-market-insights/financial-calculators/savings-taxes-inflation/