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How to calculate MACRS 7 year rate? ALRAYAN can manufacture the new smart phones for...

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Finance

How to calculate MACRS 7 year rate?

ALRAYAN can manufacture the new smart phones for $200 each in variable costs. Fixed costs for the operation are estimated to run $ 2 million per year. The estimated sales volume is 100,000, 90,000, 120,000, 110,000 and 80,000 per year for the next five years, respectively. The unit price of the new smart phone will be $500. The necessary equipment can be purchased for $100 million and will be depreciated on a Seven-years MACRS schedule. It is believed the value of the equipment in five years will be $10 million.

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