Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 39

Cheryl, an electrical engineering student who is working on a business minor, is studying depreciation and finance in her engineering management course. The assignment is to demonstrate that shorter recovery periods require the same total taxes, but they offer a time value of taxes advantage for depreciable assets. Help her, using asset estimates made for a 6-year study period: P = $65,000, S = $5000, GI = $32,000 per year, AOC is $10,000 per year, SL depreciation, i = 12% per year, T e = 31%. Make the comparison using recovery periods of 3 and 6 years.