please show work. A replacement project involves the purchase of a new machine f

Question

please show work. A replacement project involves the purchase of a new machine for $100,000 that will be depreciated over 10 years. The old machine was purchased six years ago for $60,000 and was depreciated using a 15 year life. Both machines use straight line depreciation, including the half-year convention. 1) What will the incremental depreciation expense be in the first year of the project if the old machine is sold and the new machine is purchased? 2) What will it be in the second year of the project?

Explanation / Answer

Today old asset value = 60000 - 6 * (60000/15)

                                         = 36000

Incremental depreciation = (100000 - 36000) / 10

                                               = 6400

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