# An asset costing \$32,000 has a useful life of five years at which time it can be sold for \$7,000….

1. An asset costing \$32,000 has a useful life of five years at which time it can be sold for \$7,000. Compute the net present value of the depreciation charges using an interest rate of 5% and the sum of the year’s digits method. 2. A company is considering the purchase of a machine which costs 562,000, has an expected life of four years and has a scrap value of \$15,000. The machine is expected to increase revenue by \$16,000 each year and requires a maintenance cost of \$2,000 per year. Assuming a tax rate of 38%, compute the net present value for this investment using an interest rate of 5% and the double declining balance method for two years followed by the straight-line method. 3. An asset costs \$102,000 and has an expected life of 20 years at which time it will have a scrap value of \$16,000. The asset will increase revenue by \$22,000 after maintenance costs. Assume a tax rate of 42% and use the straight-line method of depreciation to compute the internal rate of return for the investment.
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