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You must evaluate the purchase of a proposed technology for the R&D department. The base price...

You must evaluate the purchase of a proposed technology for the R&D department. The base price is $165,000 and it would cost another $20,000 to modify the equipment for special use by the firm. The equipment will be sold after 3 years for a salvage value of $50,000. The equipment will be depreciated using straight-line depreciation. The equipment requires an $8,000 increase in net operating working capital. The firm’s marginal tax rate is 35%. What is the annual depreciation expense?

-57,667

-38,333

-47,667

-45,000

-61,667

-None of the above

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Answer #1

Annual depreciation = -$45,000 -(165000+20000-50000)/3

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