Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 37

Basketball.com has installed $100,000 worth of depreciable software and equipment that represents the latest in Internet teaming and basket competition, intended to allow anyone to enjoy the sport on the Web or in the alley. No salvage value is estimated. The company can depreciate using MACRS for a 5-year recovery period or opt for the ADS alternate system over 10 years using the straight line method. The SL rates require the half-year convention; that is, only 50% of the regular annual rate applies for years 1 and 11.
a) Construct the book value curves for both methods on one graph. Show hand or spreadsheet computations as instructed.
b) After 3 years of use, what percentage of the $100,000 basis is removed for each method Compare the two percentages.