CASE 2

Toyota Motor Corporation recently acquired a subsidiary auto company and plans to revamp its old automobile plant. It was perceived that even with the present workforce, building and technology at this subsidiary plant, productivity was gradually declining. To meet rising demand, Toyota wants to expand output and increase sales by investing in an Automated Assembly line to produce vehicles of higher quality, at a lower cost, and with less pollution. The initial cost of this innovative technology will be $140,000, with an installation cost of $12,000, an economic life of 15 years and a residual value of $29,000. The Company’s Management wants to know the MACRS depreciation schedule for use in the manufacturing accounts and in making income projections for the proposed investment.