13) Overland purchased $387,950 of fixed assets that are classified as three-year property for MACRS. The MACRS rates are 3333. 4445.1481, and .0741 for Years 1 to 4, respectively. What is the amount of the depreciation expense in Year 3 assuming no bonus depreciation is taken? A) S42,399.29 B) $28,747.10 C) $59,929.11 D) $12,766.59 E) $57,455.40 17- 14) EDP is trying to decide between two different convevor belt systems. System A COSTS $438,000, has a six-year life, and requires $83.000 in pretax annual operating costs. System B costs $369,000, has a five-year life, and requires $92,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have a zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 23 percent and the discount rate is 14.2 percent. Which system should the firm choose and why? A) A; The net present value is $398,516. B) B: The net present value is --S490,696. C) A; The net present value is $547,836. D) B; The net present value is -$553,041. E) B; The net present value is --$608,222. 15) 15) Steele Insulators is analyzing a new type of insulation for interior walls. The initial fixed asset requirement is $1.62 million, which would be depreciated straight-line to zero over the 7-year life of the project. Projected fixed costs are $287,400 and the anticipated operating cash flow is $136,300. What is the degree of operating leverage for this project? A) 3.11 A C) 2.490D) 2.27E) 3.66 B) 1.92 16) - 16) An investment that provides annual cash flows of $20,100 for 8 years costs $87,500 today. At what rate would you be indifferent between accepting the investment and rejecting it? A) 15.90 percent B) 17.60 percent C) 16.74 percent D) 15.51 percent E) 15.93 percent al not