A Firm Is Considering Purchasing Two Assets

question 96

Multiple Choice

A firm is considering purchasing two assets.Asset L will have a useful life of 20 years and cost $5 million;it will have installation costs of $1 million but no salvage or residual value.Asset S will have a useful life of 8 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 $12,500 more in depreciation per year.
• B)Asset L has $37,500 more in depreciation per year.
• C)Asset S has $12,500 more in depreciation per year.
• D)Asset S has $37,500 more in depreciation per year.

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