Calculate the Total Cost, Total Depreciation, and Annual Depreciation for the Following

question 107

Short Answer

Calculate the total cost, total depreciation, and annual depreciation for the following asset using the straight-line method. $$\begin{array} { l l l l l l l l } & & & & & & { \text { Estimated } } \\& \text { Freight } & \text { Set-up } & \text { Total } & \text { Salvage } & \text { Total } & \text { Useful } & \text { Annual } \\\text { Cost } & \text { Charges } & \text { Charges } & \text { Cost } & \text { Value } & \text { Deprec. } & \text { Life } & \text { Deprec. } \\\$ 800,000 & \$ 2,500 & \$ 16,000 & & \$ 20,000 & & 10 &\end{array}$$

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Definitions:

Nominal Interest Rates

Nominal interest rates are the stated interest rates on financial products without adjustment for inflation.

Rate of Inflation

The Rate of Inflation is the pace at which the general level of prices for goods and services is rising, eroding purchasing power.

Real Interest Rates

The interest rate adjusted for inflation, representing the real cost of borrowing and the real yield to lenders or investors.

Usury Laws

Regulations that impose a maximum interest rate that may be charged on loans.