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    MACRS for new assets & discounted future value (PV) of trees

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    A. Calculate the annual MACRS depreciation for a machine in the 7-year MACRS asset class, assuming that the asset costs $20,000.

    B. If you knew that the asset had an expected salvage value of $2,000 at the end of its 12-year economic life, would your answer to part a change?

    Calculate the annual MACRS depreciation schedule for a drill press that costs $148,000 and has installation and shipping costs of $2,000. The drill press is classified as a 7-year MACRS asset.

    An acre planted with walnut trees is estimated to be worth $12,000 in 25 years. If you want to realize a 15 percent rate of return on your investment, how much can you afford to invest per acre? (ignore all taxes and assume that annual cash outlays to maintain your stand of walnut trees are nil.)

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    Solution Summary

    The solution examines MACRS for new assets and discounted future value.