A Copy Machine Acquired on May 1 with a Cost

question 22

Essay

A copy machine acquired on May 1 with a cost of $2,545 has an estimated useful life of 3 years. Assuming that it will have a residual value of $445, determine the depreciation for the first and second year by the straight-line method. Round your answers to the nearest whole dollar.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period, used in capital budgeting to assess the profitability of an investment.

Working Capital

An indicator of a company's short-term financial health and operational efficiency, calculated as current assets minus current liabilities.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows or to evaluate the attractiveness of an investment.

Net Present Value

A valuation method that calculates the present value of an investment's expected cash flows, minus the initial investment cost.