Outlaws is a general goods retail chain in the High Plains region. Outlaws is forecasting its financial statements for Year 3. Selected financial information for Years 1 and 2 is provided in the table. In Year 3 Outlaws is planning to invest $300 million in CAPEX. The average depreciation rate is 6%. What is the forecasted depreciation expense in Year 3? Selected Financial Information
Outlaws Inc. ($ millions)
$$\begin{array} { | c | c | c | }
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { PP\&E } & 9,372 & 9,637 \
\hline \text { Depreciation } & & 621 \
\hline \text { CAPEX } & & 886 \
\hline
\end{array}$$

Question

Outlaws is a general goods retail chain in the High Plains region. Outlaws is forecasting its financial statements for Year 3. Selected financial information for Years 1 and 2 is provided in the table. In Year 3 Outlaws is planning to invest $300 million in CAPEX. The average depreciation rate is 6%. What is the forecasted depreciation expense in Year 3? Selected Financial Information
Outlaws Inc. ($ millions)
$$\begin{array} { | c | c | c | } 
\hline & \text { Year 1 } & \text { Year 2 } \
\hline \text { PP\&E } & 9,372 & 9,637 \
\hline \text { Depreciation } & & 621 \
\hline \text { CAPEX } & & 886 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The depreciation expense for Year 3 is calculated by applying the average depreciation rate of 6% to the Year 2 PP&E balance plus the new CAPEX investment. Thus, Depreciation = 6% * (9,637 + 300) = $596 million.

Outlaws Is a General Goods Retail Chain in the High