A Firm Is Considering Purchasing Two Assets

question 5

Multiple Choice

A firm is considering purchasing two assets.Asset L will have a useful life of 15 years and cost $4 million; it will have installation costs of $750,000 but no salvage or residual value.Asset S will have a useful life of 5 years and cost $2 million; it will have installation costs of $500,000 and a salvage or residual value of $400,000.Which asset will have a greater annual straight-line depreciation?

• A)Asset L has $37,500 more in depreciation per year.
• B)Asset L has $54,167 more in depreciation per year.
• C)Asset S has $103,333 more in depreciation per year.
• D)Asset S has $37,500 more in depreciation per year.

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Definitions:

Pulsating

A periodic variation in magnitude or intensity, often used to describe waveforms or signals.

Peak-to-peak

A measure of the amplitude of a waveform, indicated by the difference between its maximum and minimum values.

RMS

Root Mean Square, a statistical measure of the magnitude of a varying quantity, used especially in electrical engineering to quantify the average voltage or current of alternating current (AC).

Full-wave

A method or device that converts the entire cycle of an AC waveform into a unidirectional flow of current.