1. The following data is associated with a proposed replacement project: A machi

Question

1. The following data is associated with a proposed replacement project:
A machine that originally cost $25,000 and was depreciated on a straight line basis has one year of its expected 5-year life remaining. Its current market value is $12,000. The corporate tax rate is 34%. The cash flow from disposing of the old machine, is:
A. $12,000.
B. $ 9,620.
C. ($ 9,620.)
D. $14,380.

Ans: B

2. According to the Modified Accelerated Cost Recovery System (MACRS), automobiles are to be placed with other assets that have a five-year class life. Assume Dallmeyer Digital bought a car in December 2004. What would be the last year in which it would take recognize depreciation on the vehicle?
A. 2004
B. 2009
C. 2010
D. 2011

Ans: B

3. What is the after-tax cash flow that results from the sale of a capital asset for $150,000? Assume that it has a book value of $100,000 and a 40% tax rate.
A. $150,000
B. $90,000
C. $130,000
D. $60,000
E. $170,000

Ans: C

Explanation / Answer

        Effective interest rate = discount %/(100-discount %) X 360/(FT - DP)         Where:           FT = the full term allowed for payment in days           DP = the discount period allowed for payment in days Example: Suredrips is going to pay an invoice with terms of 2/10, net 45. Plugging into the formula:         Effective interest rate = 2/(100-2) X 365/(45-10)                                 = 2/98 X 365/35                                 = 21.28% Base = 360 days in a year         Effective interest rate = 2/(100-2) X 360/(45-10)                                 = 2/98 X 360/35                                 = 20.99%

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