subject title ; PROJECT FINANCIAL MANAGEMENT

(Q). On April 1, 2011, Mitchells Industries purchased new equipment at a cost of $325,000. The useful life of this equipment was estimated at five years, with a residual value of $25,000. Instructions

Compute the annual depreciation expense for each year until this equipment becomes fully depreciated under each depreciation method listed below. Use half year convention method where needed. Show supporting computations.

a. Straight-line, + Suppose the asset can be sold for $50,000 by the end of project. Calculate its profit/loss.

b. Assume the equipment falls under 5 years MACRS, and can be sold at the end of 5 years project for only $20,000. Calcualte its profit/Loss.

you can assume any assumptions if required