Assume that income tax rates are 30 percent and that the asset qualifies for a 25 percent
Question:
Assume that income tax rates are 30 percent and that the asset qualifies for a 25 percent declining balance CCA, and the required rate of return is 10 percent.
1. The book value of an old machine is $20,000. It is to be sold for $8,000 cash. What is the effect of this decision on cash flows, after taxes?
2. The book value of an old machine is $20,000. It is to be sold for $30,000 cash. What is the effect on cash flows, after taxes, of this decision?
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1 Residual value 8000 Loss of tax shield 8000 x 030 x 025 025 010 2400 x 0714 1714 Net residu...View the full answer
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Related Book For 
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
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