Depreciation, Investment Appraisal
This two problems MUST be done in excel format. Please include explanation
1. Office equipment whose initial cost is $100,000 has an estimate actual life of 6 years , with an estimated salvage value of $10,000. Prepare tables listing the annual cost of depreciation and the book value at the end of each 6 years , based on the straight line , sum of years digits and MACRS depreciation.
2. A corporation with $7 million in annual taxable income is considering two alternatives:
Year Alternative1 Alternative2
0 -$10,000 -$20,000
1-10 $4500 $4500
11-20 $0 $4500
Both alternatives will be depreciated by straigh -line depreciation assuming a 10 year depreciable life and no salvage value.Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum atractive rate of retun of 10% after taxes , which alternative should i choose? Solve the problem by:
Present Worth Analysis
Annual Cash Flow Analysis
Rate of Retun Analyis
Future Worth Analyis
Benefit-Cost ratio analyis