The first cost characterized according to life cycle viewpoint is the cost basis to calculate the depreciation amounts of an asset during its recovery period.

True

False

A company is considering purchasing a new piece of machinery at a cost of $60,000. It is expected to generate revenue of $20,000 per year for 10 years against $7,000 of annual operating expenses. The machinery is a MACRS 3-year property. The tax rate is 40% and MARR is 15%.

3-YR MARCS percentages

33.33%

44.45%

14.81%

7.41%

	A.	The EVA for year 4 is the highest.
	B.	The EVA for year 5 is $7,800.
	C.	The EVA for year 3 is negative.
	D.	The EVA for year 2 is higher than the EVA for year 3.

If the cost basis for a MACRS 7-year property is $100,000 and the equipment is sold for $10,000 after 5 years of beneficial use, then at the end of 5th year,

7-YR MARCS percentages

14.29%

24.49%

17.49%

12.49%

8.93%

8.92%

8.93%

4.46%

	A.	there is a book loss of $22,310.00
	B.	there is a book gain of $16,775.00
	C.	there is a book gain of $22,310.00
	D.	there is a book loss of $16,775.00