Sena D. is the chief operations engineer of McLaren Mercedes responsible of depreciation processes. She is receiving her salary as £ and every month she deposits 20% of her salary to a savings account that pays her 0.1% monthly. This year McLaren has developed a wind tunnel for the cost of £100M (cost basis) to be used for the next 10 years and Sena is going to decide on the depreciation schedule. McLaren will allow other teams to use this wind tunnel and generate a profit of £50M every year, for the next 10 years. The £ to ₺ rate is currently £1 = ₺10 this year, and every year the ₺ loses 5% value againts the £. The salvage value of this wind tunnel at the end of 10 years will be £0. Sena can depreciate this wind tunnel by using two different methods: sum-of-the-years-digits approach (which we did not cover in the lectures, but you can Google it and find more details online on how to use it) or Declining Balance with X% with a switch to Straight Line. The depreciation period will be 10 years in both cases. McLaren's MARR is 10%. Moreover, McLaren is also going to participate to 20 F1 races every year for the next 10 years and Sena has been given free tickets to participate to each race as a bonus for her depreciation efforts, where each ticket has a price of £1,000. If Sena is indifferent between sum-of-the-years-digits approach and Declining Balance with X% with a switch to Straight Line approach, what is X?
Sena D. is the chief operations engineer of McLaren Mercedes responsible of depreciation processes. She is receiving her salary as £ and every month she deposits 20% of her salary to a savings account that pays her 0.1% monthly. This year McLaren has developed a wind tunnel for the cost of £100M (cost basis) to be used for the next 10 years and Sena is going to decide on the depreciation schedule. McLaren will allow other teams to use this wind tunnel and generate a profit of £50M every year, for the next 10 years. The £ to ₺ rate is currently £1 = ₺10 this year, and every year the ₺ loses 5% value againts the £. The salvage value of this wind tunnel at the end of 10 years will be £0. Sena can
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