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4. For tax purposes, a company distributes the cost of assets, such as equipment or a building, as an expense over the course of a

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4. For tax purposes, a company distributes the cost of assets, such as equipment or a building, as an expense over the course of a number of years. Because assets depreciate (lose some of their value) as they get older, companies are allowed to deduct depreciation when filing income taxes. Depreciation expense is a function of these three values. asset cost: the amount the company paid for the asset . - estimated useful life: the number of years the company can expect to use the asset residual value: the expected cash value of the asset at the end of its useful life The book value of an asset is equal to the asset cost minus the accumulated depreciation. This value represents the unused amount of asset cost that the company may depreciate in future years. There are several methods of determining the amount of depreciation in a given year. In the declining-balance method, the depreciation expense allowed each year is equal to the book value of the asset at the beginning of the year times the depreciation rate. A computer is purchased for $2500. Its depreciation rate is 40% per year. 1. Write a formula to give the book value V of the computer t years after purchase. 2. How long will it take for the book value to be one-half of the asset cost? 3. How long will it take for the book value to be the same as the residual value of $500? 4. What is the estimated useful life of the machine (in whole years)

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