Question
A. is the chief operations engineer of Ford responsible of depreciation processes. She is receiving her salary as and every month she deposits 10%
A. is the chief operations engineer of Ford responsible of depreciation processes. She is receiving her salary as £ and every month she deposits 10% of her salary to a savings account that pays her 0.2% monthly. This year Ford has developed a wind tunnel for the cost of £50M (cost basis) to be used for the next 10 years and she is going to decide on the depreciation schedule. Ford will allow other teams to use this wind tunnel and generate a profit of £25M every year, for the next 10 years. The £ to ₺ rate is currently £1 = ₺11 this year, and every year the ₺ loses 6% value against the £. The salvage value of this wind tunnel at the end of 10 years will be £0. she can depreciate this wind tunnel by using two different methods: sum-of-the-years-digits approach (which we did not cover in the lectures, but you can Google it and find more details online on how to use it) or Declining Balance with X% with a switch to Straight Line. The depreciation period will be 10 years in both cases. Ford is 10%. Moreover, Ford is also going to participate to 20 F1 races every year for the next 10 years and she has been given free tickets to participate to each race as a bonus for her depreciation efforts, where each ticket has a price of £1,500. If she is indifferent between sum-of-the-years-digits approach and Declining Balance with X% with a switch to Straight Line approach, what is X?
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