1. Langston Corporation is considering an investment in new equipment that costs

Question

1. Langston Corporation is considering an investment in new equipment that costs $16,130,000. It will be used for 2 years and qualifies as five-year MACRS property. What will the book value of this equipment be at the end of two years?

2. Meister Cheese Company is considering an investment in new equipment that costs $12,540,000. It will be used for 7 years and qualifies as five-year MACRS property. What will the book value of this equipment be at the end of seven years?

3. Langston Corporation is considering an investment in new equipment that costs $16,720,000. It will be used for 3 years and qualifies as five-year MACRS property. What will the book value of this equipment be at the end of three years?

4. Plains All American Pipeline is considering an investment in new equipment that costs $13,720,000. It will be used for 4 years and qualifies as seven-year MACRS property. What will the book value of this equipment be at the end of four years?

I need all four book values answered.

1. End of 2 years?

2. End of 7 years?

3. End of 3 years?

4. End of 4 years?

Explanation / Answer

Amt $ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 MACRS Rate for 5 Year 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% MACRS rate for 7 years 14.29% 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46%         1 Langston's New Equipment cost           16,130,000 Depreciations        3,226,000       5,161,600 Book Value      12,904,000       7,742,400 So Book Value after year 2= $   7,742,400.00         2 Meister Cheese new equipment cost           12,540,000 Depreciation        1,791,966       3,071,046      2,193,246           1,566,246    1,119,822       1,118,568       1,119,822    559,284 Book Value =      10,748,034       7,676,988      5,483,742           3,917,496    2,797,674       1,679,106          559,284 So book value after 7 year =                 559,284         3 Langstoné new equipment cost           16,720,000 Depreciation        3,344,000       5,350,400      3,210,240 Book value      13,376,000       8,025,600      4,815,360 So Book value after 3 years=             4,815,360         4 New Equipment Cost           13,720,000 Depreciation        1,960,588       3,360,028      2,399,628           1,713,628    1,225,196       1,223,824       1,225,196    611,912 Book value at the end of different years      11,759,412       8,399,384      5,999,756           4,286,128    3,060,932       1,837,108          611,912                -

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