A gas-powered electric generator is purchased by a public utility as part of an

Question

A gas-powered electric generator is purchased by a public utility as part of an expansion program. It is expected to be useful, with proper maintenance, for an estimated 30 years The cost is $17.5 million, installed. The salvage value at the end of 30 years is expected to be 10.5% of the original cost. a. What is the MACRS-GDS property class? b. Determine the depreciation deduction (d:) and the unrecovered investment (B) for years 1, 5, and the last depreciable year of the generator. ast year$ ear carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar.. Tolerance is +-10.

Explanation / Answer

Answer for question no.a:

MACRS-GDS property class is 00.4 and its life as per GDS is 15 years.

Answer for question no.b:

Half year convention is used for calculation of below mentioned depreciation:

The Depreciation for year 1 is $875,000 Book value after depreciation for year 1=16,625,000.

Depreciation for year 5 is 1,212,750. Book value after depreciation for the year 5=10,906,000.

Depreciation for last year=$516,250. Book value after depreciation for the last year=0

Year Depreciation rate(a) Depreciation(b)=175000000*(a) Opening baiance(C ) Closing balance(D)=(c )-(b) 1 5% 875000 17500000 16625000 2 9.50% 1662500 16625000 14962500 3 8.55% 1496250 14962500 13466250 4 7.70% 1347500 13466250 12118750 5 6.93% 1212750 12118750 10906000 6 6.23% 1090250 10906000 9815750 7 5.90% 1032500 9815750 8783250 8 5.90% 1032500 8783250 7750750 9 5.91% 1034250 7750750 6716500 10 5.90% 1032500 6716500 5684000 11 5.91% 1034250 5684000 4649750 12 5.90% 1032500 4649750 3617250 13 5.91% 1034250 3617250 2583000 14 5.90% 1032500 2583000 1550500 15 5.91% 1034250 1550500 516250 16 2.95% 516250 516250 0 Total 17500000

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