iPad 10:07 AM 75%-, Done EXAM #4 part A.docx IV 355 NAME: EXAM #4PARTA NOVEMBER

Question

iPad 10:07 AM 75%-, Done EXAM #4 part A.docx IV 355 NAME: EXAM #4PARTA NOVEMBER 15TH, 2017 1. JSU has decided to improve the Engineering Department. The improvement base costs are attached to your J-Number with the life and salvage values indicated. The president asked you, as the design engineer, to analyze and compare the difference between STRAIGHTLINE, MACRS and DDB in a tabular form using Excel spreadsheet. You are to complete the analysis, print out the results and bring it to class (to be submitted) to complete problems 2-4 of Part "B" of the exam. (50pts)

Explanation / Answer

Assume Discount Factor 10% Assume tax at 40% SLM Tax Saving Net Inflow Discount Factor PV 1             39,285             13,750             13,750 0.909091         12,500 2             39,285             13,750             13,750 0.826446         11,363 3             39,285             13,750             13,750 0.751315         10,330 4             39,285             13,750             13,750 0.683013           9,391 5             39,285             13,750             13,750 0.620921           8,538 6             39,285             13,750             13,750 0.564474           7,761 7             39,285             13,750             13,750 0.513158           7,056 8             39,285             13,750             13,750 0.466507           6,414 9             39,285             13,750             13,750 0.424098           5,831 10             39,285             13,750             13,750 0.385543           5,301 10             12,150             12,150 0.385543           4,684          4,05,000 NPV         89,171 10% MACRS Tax Saving Net Inflow Discount Factor PV MACRS Rate 1             40,500             14,175             14,175 0.909091         12,886 10% 2             72,900             25,515             25,515 0.826446         21,087 18% 3             58,320             20,412             20,412 0.751315         15,336 14.40% 4             46,656             16,330             16,330 0.683013         11,153 11.52% 5             37,341             13,069             13,069 0.620921           8,115 9.22% 6             29,849             10,447             10,447 0.564474           5,897 7.37% 7             26,528                9,285                9,285 0.513158           4,764 6.55% 8             26,528                9,285                9,285 0.466507           4,331 6.55% 9             26,568                9,299                9,299 0.424098           3,944 6.56% 10             26,528                9,285                9,285 0.385543           3,580 6.55% 10                1,136                   398                   398 0.385543               153 10             12,150             12,150 0.385543           4,684 3.28% NPV         95,931 DDB Tax Saving Net Inflow Discount Factor PV 1             78,570             27,500             27,500 0.909091         25,000 2             62,856             22,000             22,000 0.826446         18,181 3             50,285             17,600             17,600 0.751315         13,223 4             40,228             14,080             14,080 0.683013           9,617 5             32,182             11,264             11,264 0.620921           6,994 6             25,746                9,011                9,011 0.564474           5,086 7             20,597                7,209                7,209 0.513158           3,699 8             16,477                5,767                5,767 0.466507           2,690 9             13,182                4,614                4,614 0.424098           1,957 10             10,545                3,691                3,691 0.385543           1,423 10             42,182             14,764             14,764 0.385543           5,692 10             12,150             12,150 0.385543           4,684          4,05,000 NPV         98,247 20% NPV is higher in case of DDB so it should be adopted

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