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Cash Flow
and
Financial Planning
Depreciation
Depreciation is the allocation of the historic cost
of an asset over time
Non-cash expense
Use MACRS for tax purposes
Can use other methods for financial reporting
What are other depreciation methods?
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Depreciation: An Example
Baker Corporation acquired, for an installed cost of $40,000, a
machine having a recovery period of 5 years. Using the applicable
MACRS rates, the depreciation expense each year is as follows:
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Depreciation Example
Your company purchases a new piece of
equipment for $20,000. Delivery costs
$2,000 and installation costs $3,000.
The piece of equipment has a 5-year
depreciable live.
Calculate the annual depreciation expense
using the depreciation table.
Table 4.3
Inflows and Outflows of Cash
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