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# Depreciation, Investment Appraisal

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This two problems MUST be done in excel format. Please include explanation

1. Office equipment whose initial cost is \$100,000 has an estimate actual life of 6 years , with an estimated salvage value of \$10,000. Prepare tables listing the annual cost of depreciation and the book value at the end of each 6 years , based on the straight line , sum of years digits and MACRS depreciation.

2. A corporation with \$7 million in annual taxable income is considering two alternatives:

Year Alternative1 Alternative2
0 -\$10,000 -\$20,000
1-10 \$4500 \$4500
11-20 \$0 \$4500

Both alternatives will be depreciated by straigh -line depreciation assuming a 10 year depreciable life and no salvage value.Neither alternative is to be replaced at the end of its useful life. If the corporation has a minimum atractive rate of retun of 10% after taxes , which alternative should i choose? Solve the problem by:

Present Worth Analysis
Annual Cash Flow Analysis
Rate of Retun Analyis
Future Worth Analyis
Benefit-Cost ratio analyis

##### Solution Summary

1) Depreciation calculation using straight line , sum of years digits and MACRS ;
2) Investment Appraisal using Present Worth Analysis, Annual Cash Flow Analysism Rate of Retun Analyis, Future Worth Analyis, Benefit-Cost ratio analyis.

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