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A pharmaceutical company spends 4,000, 3,000, and 5,000 on research in 2013, 2014, and 2015, respectively. Assume that research investments have an expected life of
A pharmaceutical company spends 4,000, 3,000, and 5,000 on research in 2013, 2014, and 2015, respectively. Assume that research investments have an expected life of two years and occur evenly throughout the year. If an analyst decides to capitalize all research expenditures and uses the straight-line method to amortize research assets, what will be her estimate of the book value of the pharmaceuticals research asset at the end of 2015? If the companys ta rate is 40%, what will be the effect of this change on companys net income?
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