Question : 40.              Pro Care, Inc. sold equipment with a cost of : 1370026

 

 

40.              Pro Care, Inc. sold equipment with a cost of $62,700 and accumulated depreciation of $39,500 for $24,800 cash. If Pro Care’s income tax rate is 30%, the after-tax cash inflow from the sale of the equipment was:

A)$25,920

B)$25,280

C)$24,800

D)$24,320

 

 

41.              Burke Shoes sold machinery with a cost of $96,300 and accumulated depreciation of $54,200 for $32,500 cash. If Burke’s income tax rate is 30%, the after-tax cash inflow from the sale of the machinery was:

A)$39,220

B)$32,500

C)$22,750

D)$35,380

 

42.              Roadmaster Corporation reported depreciation expense of $345,800 for the year just ended. Assuming a 35% income tax rate, the amount of the tax shield created by the depreciation was:

A)$121,030

B)$224,770

C)$345,800

D)cannot be determined from the information given

 

 

Use the following to answer questions 43-45:

 

Forecaster Industries is considering the purchase of a new machine that will cost the company $65,750. The machine is estimated to have a 5 year life and no salvage value. The machine is expected to generate $23,000 of cash inflows each year over the life of the asset. Forecaster’s cost of capital is 12%.

 

43.              Ignoring income taxes, the maximum price Forecaster should pay for this machine is:

A)$82,910

B)$80,364

C)$65,251

D)$49,250

 

 

44.              Ignoring income taxes, the net-present-value of the investment in the machine is:

A)$(16,500)

B)$(499)

C)$ 14,614

D)$ 17,160

 

 

45.              Ignoring income taxes, Forecaster should:

A)not purchase the machine since the net-present-value is negative

B)not purchase the machine since the net-present-value is positive

C)purchase the machine since the net-present-value is negative

D)purchase the machine since the net-present-value is positive

 

Use the following to answer questions 46-48:

 

Briarwood Enterprises is considering the purchase of some new equipment that will cost the company $151,800. The equipment is estimated to have a 6 year life and no salvage value. The equipment is expected to generate $34,000 of cash inflows each year over the life of the asset. Briarwood’s cost of capital is 10%.

46.              Ignoring income taxes, the maximum price Briarwood should pay for this equipment is:

A)$110,530

B)$148,079

C)$156,600

D)$191,930

 

47.              Ignoring income taxes, the net-present-value of the investment in the equipment is:

A)$(41,270)

B)$(3,721)

C)$4,800

D)$40,130

 

48.              Ignoring income taxes, Briarwood should:

A)not purchase the equipment since the net-present-value is negative

B)not purchase the equipment since the net-present-value is positive

C)purchase the equipment since the net-present-value is negative

D)purchase the equipment since the net-present-value is positive

 

 

 

Use the following to answer questions 49-50:

 

Union Company is contemplating the acquisition of a new computer that will cost the company $19,500. The computer is expected to last 4 years, after which time it will be discarded. Union’s cost of capital is 10%, and use of the computer is expected to reduce the company’s annual cash operating costs by the following amounts:

 

Year 1

$8,000

Year 2

6,500

Year 3

5,000

Year 4

3,500

 

 

49.              Ignoring income taxes, the net-present-value of the investment in the computer is:

A)$(3,791)

B)$(709)

C)$3,500

D)$10,781