Ann purchased a 2M delivery van for her business.

The asset has an expected life of 5 years with no

residual value using a 150% declining balance with a switch over to straight line depreciation method,
what is the book value of the asset at the end of the 3rd year.

EOY BV @ beg dk for DB dk for SL BV @ end of yr

of yr
0 2M 0 0 2M
1 2M 600,000 = 2M*0.3 400,000 = 2M/5 1.4M = 2M-600k
2 1.4M 420,000 = 1.4M*0.3 350,000 = 1.4M/4980,000 =1.4M-420k
3 980K 294,000 =980K*0.3 326,666.67=980k/3
653,333.33 =980k -
326,666.76
4 653, 195,999.999=653,333.33*0.3 326,666.67= retain 326,666.66=653,333.33
333.33 because SL>DB – 326,666.67
5 326, 98,000.001=326,666.67*0.3 326,666.67=326,666.67 0
666.67 – 326,666.67

BV3= 653,333.33

Note: Kung unsa mas bigger sa dk for DB or dk for SL, mao I subtract sa BV @ beg of year

r= 15/n

= 15/5 = 0.3/30%

ANC Inc. wants to buy an equipment which costs ₱6,500,000. It is expected to have an economic life of 5
years. The equipment is estimated to generate an income of ₱2,000,000 for year 1, and then increase by
₱250,000 each year through year 5. If the equipment is purchased, ANC Inc. will depreciate it using
straight-line method to a zero-salvage value at the end of year 5. The effective income tax rate is 20%. If
ANC’s after-tax MARR is 15%, what is the after-tax PW of the company? Should they buy the equipment?

EO BTCF dk Taxable Income Income Tax ATCF

Y
0 -6.5M 0 0 0 -6.5M
1 2M 1.3M 700,000 = 2M-1.3M -140,000=700,000*.20 1.860M = 2M –
140,000
2 2.250M 1.3M 950,000 = 2.250M- 190,000=950,000*.20 2.060M=2.250M-
1.3M 190,000
3 2.500M 1.3M 1,200,000 = 240,000=1.2M*.20 2.260M=2.5M-
2.500M-1.3M 240,000
4 2.750M 1.3M 1,450,000 =
2.750M-1.3M
5 3M 1.3M 1,700,000=3M–
1.3M