An asset purchased for $100,000 with S = $20,000 after 5 years was depreciated using the 5-year MACRS rates. Expenses average $18,000 per year and the effective tax rate is 30%. The asset is actually sold after 5 years of service for $22,000. MACRS rates in years 5 and 6 are 11.52% and 5.76%, respectively. The after-tax cash flow from the sale is closest to:a. $27,760b. $17,130c. $26,870d. $20,585

An asset purchased for $100,000 with S = $20,000 after 5 years was depreciated using the 5-year MACRS rates. Expenses average $18,000 per year and the effective tax rate is 30%. The asset is actually sold after 5 years of service for $22,000. MACRS rates in years 5 and 6 are 11.52% and 5.76%, respectively. The after-tax cash flow from the sale is closest to:a. $27,760b. $17,130c. $26,870d. $20,585

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 18E

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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