Problem 14-40 (LO. 2) George is the owner of numerous classic automobiles. His i

Question

Problem 14-40 (LO. 2) George is the owner of numerous classic automobiles. His intention is to hold the automobiles until they increase in value and then sell ous events (e.g., antiqu In 2017, he sold a classic automobile for $1.5 million. He had held the automobile for five years, and it had a tax basis of $750,000. a. Was the automobile a capital asset? No. It is depreciable property used in a business. b. Assuming a rate of return of 7%, how much would he have had to invest five years ago (instead of putting $750,000 into the car) to have had $1.5 million this year? The present value factor for 5 years at 7% is .7130.

Explanation / Answer

Answer B

Present value=Future value*present value factor

=1500000*.7130

=$1,069,500

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