On December 31, 2010, Exxon bought an oil rig in Texas for $100 Million. At purchase,...
On December 31, 2010, Exxon bought an oil rig in Texas for $100 Million. At purchase, the rig had a life span of 10 years with no residual value. On December 31, 2015, the rig will have a book rate of return of 60%. How much profit will the rig generate by the end of 2015?
The right Answer is $30 million.
Homework Answers
The profit is computed as shown below:
Book value at the end of 2015 is computed as follows:
= Purchase price - depreciation till 2015
= $ 100 million - ( $ 100 million / 10 ) x 5
= $ 100 million - $ 50 million
= $ 50 million
So, the profit will be:
= $ 50 million x 60%
= $ 30 million
Feel free to ask in case of any query relating to this question
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