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Capital Expenditure for Tertiary Care Hospital

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See the attached file.
You are the CFO of a 720-bed tertiary care hospital. You have been presented with a capital expenditure request for a state-of-the-art MRI machine to be purchased on 01-01-09 for a cost of $1,250,000 with a useful life of 6 years and an expected salvage value of $35,000.

Calculate depreciation for the entire 6 year period using four depreciation methods.

For SL and SYD, calculate and use the depreciable base to determine yearly depreciation expense.
For DDB, use the total asset cost to calculate yearly depreciation but do not let total depreciation be greater than the depreciable base.
For MACRS, use Table 9-2.

Total depreciation is the same for SL, SYD, and DDB. Some of the yellow highlighted cells may not require a value.

SL METHOD

Depreciation for 2009
Depreciation for 2010
Depreciation for 2011
Depreciation for 2012
Depreciation for 2013
Depreciation for 2014
Depreciation for 2015
Depreciation for 2016

TOTAL DEPRECIATION

SYD METHOD

Depreciation for 2009
Depreciation for 2010
Depreciation for 2011
Depreciation for 2012
Depreciation for 2013
Depreciation for 2014
Depreciation for 2015
Depreciation for 2016

TOTAL DEPRECIATION

DDB METHOD

Depreciation for 2009
Depreciation for 2010
Depreciation for 2011
Depreciation for 2012
Depreciation for 2013
Depreciation for 2014
Depreciation for 2015
Depreciation for 2016

TOTAL DEPRECIATION

MACRS METHOD

Depreciation for 2009
Depreciation for 2010
Depreciation for 2011
Depreciation for 2012
Depreciation for 2013
Depreciation for 2014
Depreciation for 2015
Depreciation for 2016

TOTAL DEPRECIATION.

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Solution Summary

The solution examines capital expenditures for a 72-bed tertiary care hospital. The depreciation for the entire 6 year period using four depreciation methods is computed.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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