Software Inc. is considering the purchase of new computer equipment totaling $150,000 with an estimated salvage...

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Accounting

Software Inc. is considering the purchase of new computerequipment totaling $150,000 with an estimated salvage value of$25,000 after three years. Maintenance, repairs, supplies, andother operating costs are estimated to be $13,000 per year.Determine the following:
The annual cost based on the depreciation.
The annual cost using a desired ROI of 15%.
If the funds to purchase the equipment are borrowed at a rateof 8% for three years, what is the effect on the annual costs?
What is the annual cost if the equipment is purchased frominternal funds, and it is sold for $40,000 after two years?

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3.9 Ratings (630 Votes)

Solutions 1 The annual cost based on the depreciation Purchase Value 1 50000 Salvaged Value 25000 Useful Life 3 Year For calculating the annual cost we can use following equation Purchase value salvaged value Useful Life So See Answer

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