Question

A company just purchased an intelligent robot, which has a first cost of $80,000. Since the robot is

unique in its capabilities, the company expects to be able to sell it in 4 years for $95,000. (a) If the

company spends $10,000 per year in maintenance and operation of the robot, what will the company’s

MACRS depreciation charge be in year 2? Assume the recovery period for robots is 5 years and the

company’s MARR is 16% per year when the inflation rate is 9% per year. (b) Determine the book value

of the robot at the end of year 2.

Answer 1

It asks about the depreciation for the 3rd year,

The changes in depreciation for 5 years would be as: 20%, 32%, 19.2%, 11.52% and 5.76%

The change in 3rd year is of 19.2% because of which depreciation would be 19.2% of 284,000 = $54528

$(a)D 2 ​ =80,000(0.32)= \$ 25 , 600$

$(b)BV 2 ​ =80,000–80,000(0.20+0.32)$

$=80,000–41,600$

$= \$ 38 , 400$