-All of the following types of real property are depreciable except: Warehouses
ID: 2594880 • Letter: #
Question
-All of the following types of real property are depreciable except:
Warehouses
Land (Explain why this is correct)
Office Buildings
Test Facilities
-A machine which costs $50,000 when new has a 10 year lifetime and a salvage value equal to 10% of its original value. Determine the capital recovery costs, based on an interest rate of 7% per year, compounded annually.
$6,757 (explain why this is correct)
$7,106
$7,797
$7,824
$7,541
-You have just invested $3,000 into an account that will earn a 9% annual interest rate. You want to have $8,000 in the account at the end of 5 years. In order to have $8,000 at the end of year 5, how much must you deposit at the end of the 3rd year?
$2,848 (explain why this is correct)
$2,613
$2,397
$3,384
None of the above are within $50 of the correct amount
Warehouses
Land (Explain why this is correct)
Office Buildings
Test Facilities
Explanation / Answer
A / 1 B C D E 2 Warehouses, office buildings and test facilities will have depreciation as they were created by human beings and will have their value depletion every year. Whereas Land is created by GOD and there will be no depreciation. 3 4 machine cost 50000 current investment 5 Salvage value% 10% 6 Salvage value 5000 Recoverable at the end of 10 years 7 Depreciable cost 45000 8 Interest rate per annum 7% 9 Compounding annually 1 10 Life 10 years 11 Capital recovery cost per annum $6,757 =PMT(C8,C10*C9,-C4,C6,0) 12 13 Corpus required $8,000 14 Corpus required at the end of 5 Years 15 Immediate investment for the corpus $3,000 16 Interest rate per annum 9% 17 Interest compounding (annual) 1 18 Step-1 19 Calculation of current investment of $3000 value at the end of 5th year 20 The value at the end of Year 5 $4,615.87 =FV(C16,C14,0,-C15,0) 21 22 Step-2 23 Now to find out the balance amount required to equal to the required corpus. 24 total corpus required $8,000 25 Less: corpus achivable with step-1 $4,615.87 26 Balance required at the end of year 5 $3,384.13 27 28 Step-3 29 Now to achieve the result of step-2, how much is needed to be invested at the end of year 3 30 Future value $3,384.13 31 Term for investment 2 =(5-3) 32 Interest rate per annum 9% 33 Interest compounding (annual) 1 34 Hence the amount required at the end of year 3 $2,848.35 =-PV(C32,C31,0,C30,0)
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