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Economics: Decisions Under Uncertainty

  1. Economic service life calculations for an asset are shown below. If an interest rate of 10% per year was used in making the calculations, determine the values of P and S that were used in calculating the AW for year 3. 
Economic service life calculations for an asset are shown below. If an interest rate of 10% per year was used in making the calculations, determine the values of P and S that were used in calculating the AW for year 3. 
Economic service life calculations for an asset are shown below. If an interest rate of 10% per year was used in making the calculations, determine the values of P and S that were used in calculating the AW for year 3. 
  1. Lee Company of Westbrook, Connecticut, produces pressure relief inserts for applications of thermal relief and low-flow hydraulic pressure relief where zero leakage is needed. By the straight-line approach using a 5-year useful life, a machine purchased 3 years ago was book-depreciated. If the book value is $30,000 at the end of year 3 and the business believed that the machine will be useless at the end of its useful 5-year existence, (a) what is each year’s book depreciation charge and (b) what was the machine’s first cost?  
Lee Company of Westbrook, Connecticut, produces pressure relief inserts for applications of thermal relief and low-flow hydraulic pressure relief where zero leakage is needed. By the straight-line approach using a 5-year useful life, a machine purchased 3 years ago was book-depreciated. If the book value is $30,000 at the end of year 3 and the business believed that the machine will be useless at the end of its useful 5-year existence, (a) what is each year's book depreciation charge and (b) what was the machine's first cost? 
  1. Using (a) straight-line depreciation and (b) MACRS depreciation, complete the last four columns of the table below using an effective tax rate of 40 percent on an asset that has a first cost of $20,000 and a 3-year recovery period with no salvage value. Both cash flows are in units of $1000.  
Using (a) straight-line depreciation and (b) MACRS depreciation, complete the last four columns of the table below using an effective tax rate of 40 percent on an asset that has a first cost of $20,000 and a 3-year recovery period with no salvage value. Both cash flows are in units of $1000.
Using (a) straight-line depreciation and (b) MACRS depreciation, complete the last four columns of the table below using an effective tax rate of 40 percent on an asset that has a first cost of $20,000 and a 3-year recovery period with no salvage value. Both cash flows are in units of $1000.
Using (a) straight-line depreciation and (b) MACRS depreciation, complete the last four columns of the table below using an effective tax rate of 40 percent on an asset that has a first cost of $20,000 and a 3-year recovery period with no salvage value. Both cash flows are in units of $1000.

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