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Chapter 16.
16.7
16.8
Year
0
1
2
3
4
5
Book
Value
$100,000
90,000
81,000
72,900
65,610
59,049
Part (a)
Annual
Depreciation
0
$10,000
9000
8100
7290
6561
Part (b)
Depreciation
Rate____
----10 %
9
8.1
7.3
6.56
(c) Change the cell values to B= $350,000 (C3) and n = 5 (C6). Use the same relations.
S = $35,000
Dt = $83,000
BV4 = $118,000
One spreadsheet is used here to indicate answers to both parts.
16.15 Use a difference relation (US minus EU) for depreciation and BV in year 5 with the SLN
function.
Depreciation, Accumulated
Eq. [16.5]
depreciation
-
Book
value
$50,000
$33,335
11,112
3,704
$33,335
44,447
48,151
16,667
5,555
1,851
(b) Use the function DDB(50000,0,3,t,2) for annual DDB depreciation in column B. The
plot is developed using Excels xy scatter chart function
=DDB(50000,0,3,3,2)
(b)
(c)
Depr
$4,000
4,000
4,000
Book value
$30,000
26,000
22,000
18,000
d rate
0.1429
0.2449
0.1749
Depr
$4,287
7,347
5,247
Book value_
$30,000
25,713
18,366
13,119
4,000
4,000
4,000
4,000
0
14,000
10,000
6,000
2,000
2,000
0.1249
0.0893
0.0892
0.0893
0.0446
3,747
2,679
2,676
2,679
1,338
9,372
6,693
4,017
1,338
0
16.28 (a) and (b) For MACRS use Table 16.2 rates for n = 5. For DDB, with d = 0.2857, stop
depreciating at S = $10,000.
Year
d rate
0
1
0.20
2
0.32
3
(a)
(b)
MACRS
DDB________
Depr
BV
Depr
BV__
$50,000
$50,000
$10,000
40,000
$14,285
35,715
16,000
24,000
10,204
25,511
0.192
9,600
14,400
7,288
18,222
4
5
6
7
0.1152
0.1152
0.0576
-
5,760
5,760
2,880
8,640
2,880
0
0
5,206
3,016*
-
(b)
(c)
Chapter 17.
17.3
13,016
10,000
10,000
10,000
17.4
(a) Company 1
TI
= Gross income - Expenses - Depreciation
= (1,500,000 + 31,000) 754,000 148,000
= $629,000
Taxes = 113,900 + 0.34(629,000 335,000)
= $213,860
Company 2
TI
= (820,000 + 25,000) 591,000 18,000
= $236,000
Taxes = 22,250 + 0.39(236,000 100,000)
= $75,290
(b) Co. 1:
Co. 2:
(c) Company 1
Taxes = (TI)(Te) = 629,000(0.34) = $213,860
% error with graduated tax = 0%
Company 2
Taxes = 236,000(0.34) = $80,240
% error = 80,240 75,290 (100%) = + 6.6%
75,290
17.5
17.9