Use the Following Information for Questions 9-A and 9-B: Dowen

question 126

Essay

Use the following information for questions 9-A and 9-B: Dowen Corp. purchased a piece of equipment two years ago for $40,000. It has been depreciated straight line over a five- year life with an expected salvage value of $10,000. Dowen is considering replacing this equipment with a machine that would cost $80,000 and would be depreciated on a straight line basis over 10 years with a projected salvage value of zero. The old piece of equipment can be sold today for $22,000. The applicable tax rate is 40%.
A. What is the initial outlay for this project?
a. $55,600
b. $58,000
c. $60,400
d. $72,000
e. $80,000

B. What is the change in depreciation in Year 3 of the new machine's life?
a. $2,000 increase
b. $2,000 decrease
c. $6,000 increase
d. $8,000 increase
e. $8,000 decrease

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Definitions:

Production Systems

The methods, technologies, and processes used to produce goods and services.

Traditional Authority

A form of leadership in which the authority of an organization or a ruling regime is largely tied to tradition or custom.

Personal Appeal

The ability of an individual to attract or interest others through their personality, presence, or charisma.

Female Enlisted Personnel

Women who serve as non-commissioned officers or in other ranks within a military organization, excluding officer ranks.