Purchase Solution

Depreciable Replacement Cost

Not what you're looking for?

Ask Custom Question

You have acquired a new CT scanner at a cost of $750,000. You expect to perform 7,000 procedures per year over the estimated 5-year life of the scanner. Assuming no salvage value and an annual increase in replacement cost of 10 percent, what capital charge per procedure should the hospital levy to provide for replacement cost in the second year? (Ignore financing costs or investment income offsets.)

A. $25.93
B. $25.71
C. $21.43
D. $107.14

My answer is B, not sure if I am right.

Purchase this Solution
Solution Summary

This solution discusses depreciable replacement cost.

Purchase this Solution
Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Replacement cost accounting

    Replacement Cost Accounting is a method which allows for additional depreciation on some part of the difference between a depreciable asset's original cost and its replacement cost.

  • Replacement Cost Depreciation and Historical Cost Depreciation

    521792 Replacement Cost Depreciation and Historical Cost Depreciation You purchased an MRI scanner two years ago for $2.0 million. The MRI has a 5-year depreciable life with no salvage value.

  • Replacement Project

    Expected before tax cash savings from the new oven are $4,000 a year over its full MACRS depreciable life. Depreciation is computed using MACRS over a 5 year life, and the cost of capital is 10%.

  • Depreciation;signficant concept for capitalization policy

    b. depreciable assets being reported in the balance sheet at their fair market value. c. accumulating cash for the replacement of the asset. d. spreading the cost of an asset over its useful life to the entity. 2.

  • What is the IRR (internal rate of return)?

    The replacement of an existing non-depreciable assets (market value = $15,000) requires the purchase of new asset which costs $30,000 and is expected to generate before-tax cash savings of $5,569.23 per year for the next 5 years.

  • Trademarks or trade names

    the balance of major classes of depreciable assets a general description of the method(s) used for depreciation the accumulated depreciation for each major class of depreciable asset the useful lives for each major class of depreciable

  • Incremental Operating Cash Flows

    The depreciable value of the new machine is $72,000. Wilbur will depreciate the machine under MACRS using a five year recovery period, and is subject to a 40 perecent tax rate on ordinary income.

  • NPV of Acquisition of PPE

    What is the NPV for the proposed acquisition if the cost of capital is 10%. Please see the attached Excel 97-2003 spreadsheet for the solution. This solution illustrates how to compute the net present value of replacement equipment.

  • Depreciation Expenses for a Metal Press

    When the historical cost of the asset is updated, a price index is used to approximate replacement value. For example, a metal fabrication press, which bends and shapes metal, was bought seven years ago for $522,000.

View More Related Solutions