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HW-13 Chap. 11
* Discuss Globalization Chapter 8
* Read Newnan Chap. 11 on Depreciation
NOTE: HW is due the day BEFORE class. That is correct!
Work problems:
From Chap. 11 p 397 ff: 11-2; 11-4; 11-6; 11-12a, b, d; 11-42(c); 11-46
Note: if you need to make any assumptions, be sure to state them.
Instructions
Do all your work below; use this as a text file or use the Excel functions if you need them.
List each problem number and do the work here.
Save this file to your computer as you work.
When you are finished, go back to the Assignments page where you found this and open the
Assignment.
You will find a section called “Assignment Materials.” Near the bottom of that section is “Attach File”
and a button to Browse for Local File.
Again do your work, save it, and them use the above to attach it.
Do your work here
hem.
open the
on is “Attach File”
From Chap. 11 p 397 ff: 11-2; 11-4; 11-6; 11-12a, b, d; 11-42(c); 11-46
Prob 11-2
MACRS Depreciation
Year
Cost:
$ 1,500,000.00
MACRS %
1
2
3
4
5
6
20%
32%
19%
12%
12%
6%
20.00%($1.5 × 10^6)
32.00%($1.5 × 10^6)
19.20%($1.5 × 10^6)
11.52%($1.5 × 10^6)
11.52%($1.5 × 10^6)
5.76%($1.5 × 10^6)
Sum
MACRS
300,000.00
$480,000.00
$288,000.00
$172,800.00
$172,800.00
$86,400.00
$1,500,000.00
Use Tables 11-1, 2, 3
5-yr property for Aircraft
Use that column from 11-3
6 yrs because you take 1/2 yr in the fir
and 1/2 year after the nominal life.
Prob 11-4
Depreciation schedule for non-residential property:
Price=
$5,700,000.00
Year
Depreciation
1
1.605% $5.7M*0.01605 = $91,485
91,485.00 Use month purchased
2-39
2.564% $5.7M*0.02564 = $146,148
146,148.00 Use full year Jan.
40
0.963% $5.7M*0.00963 = $54,891
54,891.00
Since you are allowed 40 years, you must end in the month you started, May
Prob 11-6
ADR Class Life = 4 year, thus from Table 11-2 it is a MACRS 3-Year Property.
See notes about that table.
Price
$75,000.00
Year
MACRS %
Depr
Sum of Depr
Book val
0
$75,000.00
1
33.330%
$24,997.50
$24,997.50
$50,002.50
2
44.450%
$33,337.50
$58,335.00
$16,665.00
3
14.810%
$11,107.50
$69,442.50
$5,557.50
4
7.410%
$5,557.50
$75,000.00
$0.00
Prob 11-12
Price =
50000
a) Straight Line Depreciation
SV =
0
SL depreciation in each year = (P – S)/N = ($50,000 )/10= $5000
0
1
2
3
4
5
6
7
8
9
10
c) Double Declining Balance Depreciation
Do not include salvage value
DDB in any year = 2/N (Book Value)
Book
Deprec DDB
$50,000.00
=(2/10)*(50000−BV)
$10,000.00
$40,000.00 1st Year: DDB = (2/10) ($50,000 − $0) =
$8,000.00
$32,000.00 2nd Year: = (2/10) ($50,000 − $10000)
$6,400.00
$25,600.00 3rd Year: = (2/10) ($50,000 − $10000-8
$5,120.00
$20,480.00 etc.
$4,096.00
$16,384.00
$3,276.80
$13,107.20
$2,621.44
$10,485.76
$2,097.15
$8,388.61
$1,677.72
$6,710.89
$1,342.18
$5,368.71
d) MACRS
MACRS %
0
1
2
3
4
5
6
7
8
9
10
Deprec MACRS
14.29%
24.49%
17.49%
12.49%
8.93%
8.92%
8.92%
4.46%
$7,145.00
$12,245.00
$8,745.00
$6,245.00
$4,465.00
$4,460.00
$4,460.00
$2,230.00
$0.00
$0.00
$50,000.00
$42,855.00
$30,610.00
$21,865.00
$15,620.00
$11,155.00
$6,695.00
$2,235.00
$5.00
$5.00
$5.00
Prob 11-42
c) MACRS: Special tools with 4-year life are in the 3-year property class.
2nd-year MACRS = 44.45% ($10,000) = $4,445
d) MACRS
MACRS %
0
1
2
Deprec MACRS
33.33%
44.45%
$3,333.00
$4,445.00
$10,000.00
$6,667.00
$2,222.00
Prob 11-46
This equipment is classified as MACRS 15-year property given that is is “property
with ADR class life of 20 years or more and less than 25 years.”
Depreciation in year 3:
a) MACRS Dep = $100,000 (0.0855) = $8,550
b) SL Dep = ($100,000 – $15,000)/20 = $4,250
c) DDB = (2/20)(BV year 2) = (0.1) $81,000 = $8,100
a) MACRS
MACRS %
0
1
2
3
4
Deprec MACRS
5.00%
9.50%
8.55%
7.70%
$5,000.00
$9,500.00
$8,550.00
$7,700.00
$100,000.00
$95,000.00
$85,500.00
$76,950.00
$69,250.00
Price =
100000
b) Straight Line Depreciation
SV =
15000
SL depreciation in each year = (P – S)/N = ($100000-15000 )/20= $4250
0
1
2
3
4
5
6
7
8
9
10
c) Double Declining Balance Depreciation
Do not include salvage value
DDB in any year = 2/N (Book Value)
Book
Deprec DDB
$100,000.00
=(2/20)*(100000)
$10,000.00
$90,000.00
$9,000.00
$81,000.00
$8,100.00
$72,900.00
$7,290.00
$65,610.00
$6,561.00
$59,049.00
$5,904.90
$53,144.10
$5,314.41
$47,829.69
$4,782.97
$43,046.72
$4,304.67
$38,742.05
$3,874.20
$34,867.84
Etc.
Summary
les 11-1, 2, 3
perty for Aircraft
t column from 11-3
cause you take 1/2 yr in the first year
year after the nominal life.
Use Table 11-4
nth purchased
e month you started, May.
es about that table.
10 years
5000
: DDB = (2/10) ($50,000 − $0) = $10,000
r: = (2/10) ($50,000 − $10000) = $8,000
r: = (2/10) ($50,000 − $10000-8000) = $6400
20 years
4250
Engineering Economics — Homework Format
Instructions
Do all your work below; use this as a text file or use the Excel functions if you need them.
List each problem number and do the work here.
Save this file to your computer as you work.
When you are finished, go back to the Assignments page where you found this and open the Assignment.
On this specific Assignment, you will find a section called “Assignment Materials.” Near the bottom of that section
Browse for Local File.
Again do your work, save it, and them use the above to attach it.
Note although this course is largely following the schedule in the Syllabus there will be some date changes. Regard
assignment, check the Syllabus (which will be updated) from time to time.
Do your work here
open the Assignment.
ear the bottom of that section is “Attach File” and a button to
be some date changes. Regardless, if there is no posted
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