Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 MACRS 20% 32% 19.20% 11.52% 11.52% 5.7

Question

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

MACRS 20% 32% 19.20% 11.52% 11.52% 5.76%

Depreciation rate

A bakery invest $34,000 in a light delivery truck. This was depreciated using the 5 years MACRS schedule shown above. If the company sold it immediately after the end of year 2 for $21,000. What would be the after-tax cash floe from sale of this asset, given a tax rate of 40%

A. $11,208

B. $9,792

C. $4,483

D. $16,517

2. If the Federal Reserve were to change from an expanasionary to a contractionary monetary policy, this would be an example of_________

A. independent risk

B. diversification risk

C. systematic risk

D. unsystematic risk

Explanation / Answer

1. C

2. D

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