Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 23

The manager of a Glidden Paint manufacturing plant is aware that MACRS and DDB are both accelerated depreciation methods; however, out of curiosity, she wants to determine which one provides the faster write-off in the first 3 years for a recently purchased mixer that has a first cost of $300,000, a 5-year recovery period, and a $60,000 salvage value. Determine which method yields the lower book value and by how much after 3 years. The annual MACRS depreciation rates are 20%, 32%, and 19.2% for years 1, 2, and 3, respectively.