Question text

A firm is considering the following two assets. Asset ONE will have a useful life of 12 years and cost $3.33 million; it will have installation costs of $399,000 with no salvage or residual value. Asset TWO will have a useful life of 5 years and cost $1.345 million; it will have installation costs of half of asset ONE's, and a salvage or residual value of $215,090. The firm's tax rate is 34%, and it's cost of capital is 15%. The firm is also planning to borrow money from it's bank in order to pay for the assets. Based on it's current credit rating, it is expected to pay 4.567% for any additional loan from the bank. If the company acquired any of the assets, net working capital is expected to increase by $215,000.

Show and calculate the annual depreciation of both assets.