Description of this paper

1. A corporation is evaluating the relevant cash f...

Description

Solution


Question

1. A corporation is evaluating the relevant cash flows for a capital budgeting decision and must estimate the terminal cash flow. The proposed machine will be disposed of at the end of its usable life of five years at an estimated sale price of $15,000. The machine has an original purchase price of $80,000, installation cost of $20,000, and will be depreciated under the five-year MACRS. Net working capital is expected to decline by $5,000. The firm has a 40 percent tax rate on ordinary income and long-term capital gain. The terminal cash flow is __________. a. $24,000 b. $14,000 c. $26,000 d. $16,000,Thank you for your help on this one... I do appreciate it sincerely.,2. A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $30k and being depreciated under MACRS using five-year recovery period. The existing asset can be sold for $25k. The new asset will cost $75k and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40% on ordinary income and capital gains, the INITIAL INVESTMENT IS= A. $42000 B. $54.400 C. $52,440 D. $50,000,2. A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $30k and being depreciated under MACRS using five-year recovery period. The existing asset can be sold for $25k. The new asset will cost $75k and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40% on ordinary income and capital gains, the INITIAL INVESTMENT IS= A. $42000 B. $54.400 C. $52,440 D. $50,000"

 

Paper#7099 | Written in 18-Jul-2015

Price : $25
SiteLock