Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing...
Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a children's toy that is soft, pliable but also bouncy. The machine will increase EBITDA by $ 215,000 per year for the next two years. Assume that operating cash flows occur at the end of each year. The machine's purchase price is $ 305,000 and the salvage value at the end of two years is $ 73,200. The machine is classified as 3-year property. To run the Crazy Rubber production line the company will need to purchase an inventory of polydimethylsiloxane and boric acid for a total cost of $ 18,000. The MACRS depreciation rates for the first two years are 33.33 % and 44.45 %. What is the depreciation expense in the second year of operations?
Homework Answers
Depreciation expense in first year:
= Asset cost×MACRS rate for 2nd year
= $305,000×44.45%
= $135,572.50
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Tinney & Smyth Inc. is considering the purchase of a new
batch polymer-bonding machine for producing...
Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for ...
Tinney & Smyth Inc. is considering the purchase of a new batch polymer-bonding machine for producing Crazy Rubber, a children's toy that is soft, pliable but also bouncy. The machine will increase EBITDA by $ 255,000 per year for the next two years. Assume that operating cash flows occur at the end of each year. The machine's purchase price is $ 300,000 and the salvage value at the end of two years is $ 78,000. The machine is classified as...
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