Engineering Economics:

Problem 9.12 (25 points). The double-declining-balance method (DDBM) is to be used for an asset with a cost of $88,000, an estimated salvage value of $13,000, and an estimated useful life of six years. (a) What is the depreciation for the first three fiscal years, assuming that the asset was placed in service at the beginning of the year (15 pts)? (b) If switching to the straight-line method is allowed, when is the optimal time to switch and why (10 pts). HINT Follow example in class slides, comparing DDBM versus Straight Line depreciation in a year. You switch to SL if DDBM allowed depreciation is lower than the SL method depreciation and continue from there to depreciate the asset until end of year 7