Question

Gluon Incorporated is considering the purchase of a new high-pressure glueball. What is the equivalent annual saving from the purchase if Gluon can depreciate 100% of the investment immediately?

a. $18,000
b. $14,000
c. $8,000
d. $80,000

Answer 1

To calculate the equivalent annual saving from the purchase, divide the cost of the glueball by the number of years it will be used.

Step-by-step explanation:

To calculate the equivalent annual saving from the purchase, we need to determine the depreciation amount and the number of years the glueball will be used.

Since Gluon can depreciate 100% of the investment immediately, the depreciation amount is equal to the cost of the glueball.

Let's say the cost is $80,000. If the glueball is expected to be used for 5 years, the equivalent annual saving would be $80,000 / 5 = $16,000. Therefore, the correct answer is $16,000.