Zinc, Inc. is considering the acquisition of a new processing line. The processo

Question

Zinc, Inc. is considering the acquisition of a new processing line. The processor can be purchased for $3,750,000; it will have a 10-year useful life. It will cost $165,000 to ship and $85,250 to install the processor. A recently completed feasibility study that was performed at a cost of $65,000 indicated that the processor would produce a positive NPV. The processor will be depreciated using the straight-line method to zero expected salvage value. Studies have shown that employee-training expenses will be $125,000. What will be the annual depreciation expense of the processing line for capital budgeting purposes?

Answer

$375,000

$390,000

$419,025

$400,025

Explanation / Answer

Zinc, Inc. Is considering the acquisition of a new processing line. The processor can be purchase for $3,750,000; it will have a 10 year useful life. It will cost $165,000 to ship and $85,250 to install the processor. A recently completed feasibility study that was performed at a cost of $65,000 indicated that the processor would produce a positive NPV. The processor will be depreciated using the straight line method to zero expected salvage value. ?Studies have shown that employee-training expenses will be $ 125,000. What will be the annual depreciation expenses of the processing line for capital budgeting purposes?

1. FULL COST = shipping + cost + install + train employees + the study = 3,750,000 + 165,000 + 85,250 + 125,000 + 65,000 = $4 190 250

Divided by 10 years of life =

$419,025

$375,000
$419,025
$390,000
$400,025

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