Engineering Economy 255330 Assignment 11 Chapter 16 Depreciation Methods Due Date: 16.10 Home Health Care, Inc. (HHCI) purchased a new sonargram imaging unit for $300,000 and had it mounted on the truck body for an additional $100,000, including the truck chassis. The unittrack system will be depreciated as one asset. The function life is 8 years, and salvage is estimated at 10% of the purchase price of the imaging unit. (a) Use classical straight line depreciation, and hand calculations to determine the salvage value, annual depreciation, and book value after 4 years. (b) Develop the cell reference worksheet in excel to obtain the answer in part (a) for the original data. (c) Use your Excel worksheet to determine the answer, if the sonargam unit cost goes up to $350,000 and the expected life is decreased to 5 years. ((a) S = $30,000 , Dt = $46,250 , BV4 = $215,000 ,(c) S = $35,000 ,Dt = $83,000 , BV4 = $118,000) 16.14 A special-purpose computer workstation has B=$50,000 with a 4-year recovery period. Tabulate and plot the values for SL depreciation, accumulated depreciation, and book value for each year if (a) there is no salvage value and (b) S = $16,000. 16.19 A warehouse costs $800,000 to construct for Ace Hardware. It has a 15-year life with an estimated resale value of 80% of the construct cost. However, the building will be depreciated to zero over a recovery period of 30 years. Calculate the annual depreciation charge for year 5,10, and 25, using (a) straight line depreciation and (b) DDB depreciation. (c) What is the implied salvage value for DDB? ((a) Dt = $26,667 ,(b) D5 = $40,472, D10 = $28,664, D25 = $10,183, (c) D30 = 100,959 ) 16.20 Allison and Carl are civil engineers who own a soil and water analysis business for which they have purchased computer equipment for $25,000. They do no expect the computers to have a positive salvage or trade-in value after the anticipated 5-year life. For book depreciation purposes, they want book value schedules for the following methods: SL, DB, and DDB. They want to use a fixed depreciation rate of 25% annually for the DB model. Use a spreadsheet or hand computation to develop the schedules. 16.36 A highway construction company has operated a quarry for the past 5 years. During this time the following tonnage has been extracted each year: 60,000; 50,000; 58,000; 60,000; and 65,000 tons. The mine is estimated to contain a total of 2.5 million tons of usable stones and gravel. The quarry land had an initial cost of $3.2 million. The company had a per ton gross income of $30 for the first year, $25 for the second year, $35 for the next 2 years, and $40 for the last year. (a) Compute the depletion charges each year, using the larger of the values for the two depletion methods (b) Compute the percent of the initial cost that has been written off in these 5 years, using the depletion changes in part (a) (c) Use a spreadsheet to answer parts (a) and (b) (d) If the quarry operation is reevaluated after the first 3 years of operations and estimated to contain another 1.5 million tons, rework parts (a) and (b) 16.A.2 Earthmoving equipment with a first cost of $ 150,000 is expected to have a life of 10 years. The salvage value is expected to be 10% of the first cost. Calculate (a) by hand and (b) by computer the depreciation charge and book value for years 2 and 7 using the SYD method. ((a) D2 = $22,091, BV2 = $103,364, D7 = $9,818, BV7 = $29,727)