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6 March, 16:40

Michael is an Internet service provider. On December 31, 2014, he bought an existing business with servers and a building worth $400,000. During 2015, his business grew and he bought new servers for $500,000. The market value of some of his older servers fell by $100,000.#1. What was Michael's gross investment, depreciation, and net investment during 2015?#2. What is the value of Michael's capital at the end of 2015?

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  1. 6 March, 19:37
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    Data provided in the question

    Building worth = $400,000

    The new servers purchase cost = $500,000

    And, the older serves fell by $100,000

    So by considering the above information

    1. The gross investment is

    = The new servers purchase cost

    = $500,000

    The depreciation is

    = Older serves falling value

    = $100,000

    And, the net investment is

    = Gross investment - depreciation

    = $500,000 - $100,000

    = $400,000

    2. Now the value of Michael capital at the end is

    = $400,000 - $100,000 + $500,000

    = $800,000
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