Complete the problems: 1) A machine that has a value of $150,000...

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Complete the problems:

1) A machine that has a value of $150,000 and a 10 year life span at which at the end of 10 years, the machine will be worth zero. Using the straight line depreciation method, calculate how much depreciation can be accounted for each year (hint: y=mx+b).

2) The same machine, having a 10 year life span, is to be depreciated using MACRS (see factoring chart provided). How much can be counted towards depreciation each year? (Hint: Total amount x factor FOR EACH YEAR .... yes, there will be 11 years).

3) Suppose at the end of 10 years, the machine has a scrap value of $10,000. If taxes are 20%, how much will be owed in taxes?

4) Suppose that the machine can be sold for $30,000 in year 8. How in taxes will have to be paid? (Hint: the total depreciation UP until year 8 using MACRS and subtract the "book value" (ie depreciation amount) from that amount. If positive, have to pay taxes on the difference. Assume taxes are 20%).

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1) Value of Machine = $150,000
Life of Machine    =    10 Years
Rate of depreciation = 1/10*100%= 10% per year
Residual Value after 10 years = 0

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