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Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000. The machine has a useful life of 12-years, but will be depreciated using MACRS over a seven year property class. 1. What is the cost basis of the machine? 2. What will be the depreciation allowance each year over the seven years? 3. If we sell the machine at the end of 5-years for $70,000, what will be the gains/loss tax assuming a 40% tax rate? 4. What are the net-proceeds from the sale?

Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000. The machine has a useful life of 12-years, but will be depreciated using MACRS over a seven year property class. 1. What is the cost basis of the machine? 2. What will be the depreciation allowance each year over the seven years? 3. If we sell the machine at the end of 5-years for $70,000, what will be the gains/loss tax assuming a 40% tax rate? 4. What are the net-proceeds from the sale?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000. The machine has a useful life of 12-years, but will be depreciated using MACRS over a seven year property class. 1. What is the cost basis of the machine? 2. What will be the depreciation allowance each year over the seven years? 3. If we sell the machine at the end of 5-years for $70,000, what will be the gains/loss tax assuming a 40% tax rate? 4. What are the net-proceeds from the sale? Class 10 15 20 Year Depreciation Rate 200% 200% 200% 200% 150% 150% 1. $265,000 + $46,000 = $311,000 33.33 20.00 14.29 10.00 5.00 3.750 44.45 32.00 24.49 18.00 9.50 7.219 3. 14.81 19.20 17.49 14.40 8.55 6.677 1 14.29% $44,442 $266,558 7.41 I1.52 12.49 11.52 7.70 6.177 24.49% $76,164 $190,394 17.49% $54,394 $136,000 12.49% $38,844 $97,156 8.93% $27,772 $69,384 0.04465 2. 11.52 8.93 9.22 6.93 5.713 3 5.76 8.92 7.37 6.23 5.285 4 8,93 6.55 5.90 4,888 $13,886 $83,269.85 4.46 6.55 5.90 4.522 4.462 8.92% $27,741 $41,643 6.56 5.91 8.93% $27,772 $13,871 4.46% $13,871 10 6.55 5.90 4.461 3.28 8 $0 5.91 4.462 12 $227,730 $83,270 $70,000 ($13,270) ($5,308) 5.90 4.461 Total Depreciation 13 5.91 4.462 Book Value 14 5.90 4.461 Salvage 15 5.91 4.462 Net Loss 16 2.95 4.461 Тax 17 4.462 18 4.461 Net Proceeds $75,308 19 4.462 20 4.461 21 2.231
Transcribed Image Text:Company purchases a new punch press at a cost of $265,000. Delivery and installation cost $46,000. The machine has a useful life of 12-years, but will be depreciated using MACRS over a seven year property class. 1. What is the cost basis of the machine? 2. What will be the depreciation allowance each year over the seven years? 3. If we sell the machine at the end of 5-years for $70,000, what will be the gains/loss tax assuming a 40% tax rate? 4. What are the net-proceeds from the sale? Class 10 15 20 Year Depreciation Rate 200% 200% 200% 200% 150% 150% 1. $265,000 + $46,000 = $311,000 33.33 20.00 14.29 10.00 5.00 3.750 44.45 32.00 24.49 18.00 9.50 7.219 3. 14.81 19.20 17.49 14.40 8.55 6.677 1 14.29% $44,442 $266,558 7.41 I1.52 12.49 11.52 7.70 6.177 24.49% $76,164 $190,394 17.49% $54,394 $136,000 12.49% $38,844 $97,156 8.93% $27,772 $69,384 0.04465 2. 11.52 8.93 9.22 6.93 5.713 3 5.76 8.92 7.37 6.23 5.285 4 8,93 6.55 5.90 4,888 $13,886 $83,269.85 4.46 6.55 5.90 4.522 4.462 8.92% $27,741 $41,643 6.56 5.91 8.93% $27,772 $13,871 4.46% $13,871 10 6.55 5.90 4.461 3.28 8 $0 5.91 4.462 12 $227,730 $83,270 $70,000 ($13,270) ($5,308) 5.90 4.461 Total Depreciation 13 5.91 4.462 Book Value 14 5.90 4.461 Salvage 15 5.91 4.462 Net Loss 16 2.95 4.461 Тax 17 4.462 18 4.461 Net Proceeds $75,308 19 4.462 20 4.461 21 2.231
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