You are considering a purchase of a new luxury automobile at a cost of $175,000. By being a luxury taxi driver, you expect the vehicle to generate average revenues of $5,000 per month. Average operating costs will be $1,000 per month and there is an annual oil service that will cost $3,000. If MARR is 6%,
A) What is the book value for the vehicle at the end of year 7, if this is a 7 year MACRS property?
B) You are aware that IRS uses MACRS for equipment depreciation, but as a basis for comparison, you are interested in the results of a straight-line depreciation calculation. So, what is the unrecovered investment for a vehicle at the end of year 7 if you plan to keep it for 10 years and sell as a salvage for $60,000 at the end of year 10?