capital budgeting

| December 3, 2015

A firm is considering purchasing two assets. Asset A will have a useful life of 10 years and cost $3 million; it will have installation costs of $400,000 but no salvage or residual value. Asset B will have a useful life of 4 years and cost $1.3 million; it will have installation costs of $180,000 and also have no residual value. Which asset will have a greater annual straight-line depreciation?

Answer

Asset B has $30,000 more in depreciation per year.

Asset B has $40,000 more in depreciation per year.

Asset A has $40,000 more in depreciation per year.

Asset A has $30,000 more in depreciation per year.

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