Question
The used equipment will cost $105,000 with another $15,000 required to install the equipment. The equipment is projected to have an economic life of three
The used equipment will cost $105,000 with another $15,000 required to install the equipment.
The equipment is projected to have an economic life of three years with a salvage value of $9,000. The
equipment will provide the capacity to blend an additional 800,000 gallons annually. The variable
blending cost is estimated to be $.20 per gallon. The equipment will be depreciated under the Modified
Accelerate Cost Recovery System (MACRS) 3-year class. Under the current tax law, the depreciation
allowances are 0.33, 0.45, 0.15, and 0.07 in years 1 through 4, respectively. The increased sales volume
will require an additional investment in working capital of 2% of sales (to be on hand at the beginning
of the year).
please explain why the depreciation expense is 39600 and not 39996
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