If $10,000 is invested now, the number of then-current dollars that would be req

Question

If $10,000 is invested now, the number of then-current dollars that would be required 10 years from now to earn a real interest rate of 6% per year when the inflation rate is 4% per year would be closest to: $14,800 $17,900 $26,508 $27,880 Del Norte Brick Co. is located near the intersection of Texas, New Mexico, and Mexico. Access to the company's property is via a small bridge across the Rio Grande. The cost of the bridge was $770,000. Determine the depreciation for year three according to the MACRS method if the salvage value of the bridge is expected to be $70,000. Depreciation rates of 5.00, 9.50, and 8.55 apply for years 1, 2, and 3, respectively. $38,500 $43,410 $59,850 $65,835 A capital gain is calculated as: Book value-selling price Book value - first cost Market value-selling price Selling price - first cost

Explanation / Answer

6) We need to calculate the present value of the investment of $ 10,000 made At the rate of interest and inflation rates provided, the number of then-current dollars will be closest to $ 26,508, using the Present Value formula 7) Del Norte Brick Co. All Amounts in $ Book Value for Depreciation Calculation = ($ 770,000 - $ 70,000) = $ 700,000 Depreciation on this value for year 3 will be 8.55% of $ 700,000 = $ 59,850. 8) A Capital Gain is calculated as Selling Price less the First Cost of the item, which is subject to capital gains.

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