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business
economics 14th global

Questions and Answers of Economics 14th Global

True or False: Sinking fund depreciation is the only depreciation method described in the book that is based on the time value of money.
The depreciation deduction for year 11 of an asset with a 20 -year useful life is \(\$ 4,000\). If the asset's salvage value was estimated to be zero and straight-line depreciation was used to
A surface mount PCB placement/soldering line is to be installed for \($1.6\) million. It will have a salvage value of \($100,000\) after 5 years. Determine the depreciation deduction and the
Which of the following is not true about depreciation?a. Depreciation is not a cash flow.b. To be depreciable, an asset must have a life longer than 1 year.c. A5-year property will generate a regular
A tractor for over-the-road hauling is purchased for \($90,000.\) It is expected to be of use to the company for 6 years, after which it will be salvaged for \($4,000.\) Calculate the depreciation
The depreciation allowance for a \(\$ 100,000\) MACRSGDS asset was \(\$ 8,550\) after its third year. What was the depreciation allowance after its second year?a. \(\$ 8,550\)b. \(\$ 9,500\)c. \(\$
WindPower Inc. designs and commissions the manufacture of a wind-powered inverter-based constant voltage generator for research and experimentation with low-rated, highly variable wind fields as a
A high-precision programmable router for shaping furniture components is purchased by Henredon for \($190,000.\) It is expected to last 12 years and have a salvage value of \($5,000.\) Calculate the
A land grant university has upgraded its course management system (CMS), integrating the system throughout all of its main campus and branch campuses around the state. It has purchased a set of 15
MACRS-ADS depreciation is only considered in Section 9.6.1, and no tables are provided in this text. A 27.5-year residential rental property is purchased in April by a calendar-year taxpayer for
Pretend that you have misplaced your MACRS tables. Develop the MACRS depreciation table for a property class of 3 years, assuming 200 percent DB depreciation switching to straight line; a half-year
Pretend that you have misplaced your MACRS tables. Develop the MACRS depreciation table for a property class of 5 years, assuming 200 percent DB depreciation switching to straight line; a half-year
Suppose the IRS has instituted a new MACRS-GDS property class of only 2 years. It will follow the usual depreciation conventions, determined in the same way as 3-, 5-, 7-, and 10-year property.
Suppose the IRS has instituted a new MACRS-GDS property class of 4 years. It will follow the usual depreciation conventions, determined in the same way as 3-, 5-, 7-, and 10-year property. Determine
For each of the assets named in Problem 9.4 (a–g), state both the MACRS-GDS property class, if applicable, and the specific depreciation method to be used. (e.g., 15-year Property; 150 percent
For each of the assets named in problem 9.5 (a–g), state both the MACRS-GDS property class, if applicable, and the specific depreciation method to be used (e.g., 15-year property; 150 percent
Englehard purchases a slurry-based separator for the mining of clay that costs \($700,000\) and has an estimated useful life of 10 years, a MACRS-GDS property class of 7 years, and an estimated
Bell’s Amusements purchased an expensive ride for their theme and amusement park situated within a city-owned expo center. Bell’s had a multiyear contract with the expo center. The ride cost
A manufacturing system for fabricated metal products is purchased for \($800,000\) in the middle of the fiscal year. The estimated salvage value after 10 years is \($130,000.a.\) What is the
Milliken uses a digitally controlled ‘‘dyer’’ for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. It is purchased on April 1 for
At the beginning of the fiscal year, Remington purchases a mold for manufacturing powdered metal firearm parts for \($120,000.\) The estimated salvage value after 8 years is \($10,000.\) Calculate
A tractor for over-the-road hauling is purchased for \($90,000.\) It is expected to be of use to the company for 6 years, after which it will be salvaged for \($4,000.\) Calculate the depreciation
A virtual mold apparatus for producing dental crowns permits an infinite number of shapes to be custom constructed based upon mold imprints taken by dentists. It costs $28,500 and is purchased at the
A surface mount PCB placement/soldering line for the manufacture of electronic components is to be installed for \($1.6\) million with an expected life of 6 years. Determine the depreciation
A high-precision programmable router for shaping furniture components is purchased by Henredon for $190,000. It is expected to last 12 years. Calculate the depreciation deduction and book value for
A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRSGDS 5-year property class) is purchased in December by a calendar-year taxpayer for
A three-in-one grain conveyor used in the manufacture of grain for transporting, filling, or emptying is purchased and installed for $75,000. It is placed in service during the middle of the tax
Material handling equipment used in the manufacture of sugar is purchased and installed for $250,000. It is placed in service in the middle of the tax year and removed from service 5.5 years later.a.
Electric generating and transmission equipment is placed in service at a cost of \($3,000,000.\) It is expected to last 30 years with a salvage value of \($250,000.a.\) What is the MACRS-GDS property
A hydroprocessing reactor, an asset used in petroleum refining, is placed into service at a cost of $2.7 million. It is thought to have a useful life, with turnarounds and proper maintenance, of 18
A public utility purchases a gas-powered electric generator as part of an expansion program. It is expected to be useful, with proper maintenance, for an estimated 30 years. The cost is $17 million,
A building with business offices, a reception area, and numerous small diagnosis rooms is placed in service by a group of three orthopedic surgeons on January 4 for $650,000.a. What is the MACRS-GDS
A nonresidential business building is placed in service by a calendar-year taxpayer on March 3 for $300,000.a. What is the MACRS-GDS property class?b. Calculate the depreciation deduction for years
A residential rental apartment complex is placed in service by a calendar-year taxpayer on February 27 for \($530,000.\) The apartments are kept for slightly more than 6 years and are sold on March
A permanent steel building used for the overhaul of dewatering systems (engines, pumps, and wellpoints) is placed in service on July 10 by a calendar-year taxpayer for $240,000. It is sold almost 5
Now that you are making the big bucks, your spouse has decided to venture into the rental property business. He purchases a rental house, and after making some improvements, it has a basis of
Computer-based central office electronic switching for telephone and data use has an installed cost of \($300,000.\) It is in the MACRS-GDS 5-year property class. Upon disposal, the equipment will be
Ultra-clean special handling devices used in the filling process for baby-food manufacture are placed into use at a cost of $850,000. These devices are expected to be useful for 4 years with a
Equipment for manufacturing vegetable oil products is purchased from Alfa. Items such as oil expellers, filter presses, and a steam generator are purchased for $1.2 million. These devices are
A supplier of plastic and resin parts has demands for thousands of different part configurations from hundreds of small customers. Many of these parts are similar, and rather than mold each different
The Eimac tubes in a linear amplifier for radio transmission are estimated to provide 18,000 hours of operation before requiring replacement. A pair of tubes costs $20,000 and has no salvage value.
A robotic precision spot welder is purchased for \($380,000.\) The installation cost is \($45,000,\) which will be expensed.It will have a useful life of 24,000 hours of operation, after which it
A tractor with a front-end loader and a backhoe costs \($20,000\) and is rented by the hour, day, or week. It is expected to depreciate to \($2,000\) when it has been rented out until the total
Rights to mine copper from a tract of land are purchased for \($1,200,000.\) It is estimated that there are 1,800,000 pounds of copper in the reservoir to be mined. The copper can be sold for
A Central Appalachia 12,500 Btu, 1.2 SO2 coal has an average price of \($60\) per ton. A mine having 7 million tons of coal has a first cost of \($42\) million. The cost of mining is \($45\) per ton.
Mineral rights on a gold-producing property are purchased for \($2,300,000.\) A total of 27,000 of gold is expected to be mined and can be sold for \($450/ounce.\) It will cost \($250/ounce\) to mine
For each statement in Parts a throughd, give a short answer or indicate True or False.a. Which of the following is a cash flow: (1) depreciation, (2) loan interest paid, and/or (3) income tax?b. We
True or False: If an investment cannot be justified economically using a before-tax analysis, it cannot be justified using an after-tax analysis.
The correctly calculated taxes due on a corporate taxable income of \(\$ 13,000,000\) are closest to which of the following? a. \(\$ 3,400,000\)b. \(\$ 4,420,000\)c. \(\$ 4,450,000\)d. \(\$
What are the three main messages from this chapter (you should know where to find them)?
True or False: After-tax present worth will be greater when using MACRS than it will be when using \(S L N\).
When a business calculates taxable income from gross income, which of the following is true?a. Depreciation, interest, and principal are all subtracted.b. Depreciation and interest are subtracted;
What are the various taxes that corporations pay in the United States? Which has the most significant impact upon economic analyses?
True or False: The faster an asset is depreciated, the greater will be its after-tax present worth.
Consider the following data extracted from an aftertax cash flow calculation:Before Tax Cash Flow \(=\$ 22,500\)Loan Principal Payment \(=\$ 5,926\)Loan Interest Payment \(=\$ 2,400\)MACRS
Income taxes are calculated based on gross income less certain allowable deductions. They are also assessed on gains resulting from the disposal of property. In 10 words or less, define (appropriate
True or False: If money can be borrowed for \(20 \%\) compounded annually and the marginal income tax rate is \(40 \%\), then it will be profitable to borrow the investment capital if your after-tax
Consider the following data extracted from an after-tax cash flow calculation:Before Tax Cash Flow \(=22,500\)Loan Principal Payment \(=7,434\)Loan Interest Payment \(=892\)MACRS Depreciation
Calculate the corporate income tax for each of the following corporate taxable incomes. For each, determine the effective (average) tax rate and the marginal tax
True or False: If the same amount of money is invested in something that can be expensed as in something that must be depreciated (and both provide the same annual returns) then you should choose the
The marginal tax rate on a corporate income of \(\$ 87,000\) is closest to which of the following? a. 15 percentb. 20.5 percentc. 25 percentd. 34 percent
Calculate the corporate income tax for each of the following corporate taxable incomes. For each, determine the effective (average) tax rate and the marginal tax
True or False: If investment capital is borrowed, the income tax rate equals \(40 \%\), the after-tax MARR is \(12 \%\), and the loan rate is \(15 \%\), then it is best to repay the loan using Plan 1.
The average tax rate on a corporate income of \(\$ 87,000\) is closest to which of the following? a. 15 percentb. 20.5 percentc. 25 percentd. 34 percent
Calculate the corporate income tax for each of the following corporate taxable incomes. For each, determine the effective (average) tax rate and the marginal tax
True or False: If investment capital is borrowed, the income tax rate equals \(40 \%\), the after-tax MARR is \(12 \%\), and the loan rate is \(10 \%\), then it is best to repay the loan using Plan 4.
When considering the use of debt capital to finance a project, the upper limit for the interest rate on an attractive loan can be determined by which of the following?a. MARRb. \(M A R R *(1+\) tax
Determine the smallest taxable income on whicha. the very last dollar is taxed at 35 percent or more.b. the effective tax rate is 34 percent or more.c. the effective tax rate is 35 percent or more.
True or False: If investment capital is borrowed, the income tax rate equals \(40 \%\), the after-tax MARR is 9\%, and the loan rate is \(18 \%\), then it is best to repay the loan using Plan 2.
Consider the following data for 2007 from an aftertax cash flow analysis. What is the after-tax cash flow for 2007 ?Before - Tax Cash Flow \(=\$ 23,000\)Loan Principal Payment \(=\$ 3,203\)Loan
Determine the smallest taxable income on whicha. the very last dollar is taxed at 25 percent or more.b. the effective tax rate is 20 percent or more.c. the effective tax rate is 25 percent or more.
True or False: The investment tax credit is not in force, currently.
Consider the following data for 2007 from an after-tax cash flow analysis.What is the taxable income for 2007 ?Before - Tax Cash Flow \(=\$ 23,000\)Loan Principal Payment \(=\$ 3,203\)Loan Interest
An engineer named Don maintains a small incorporated civil engineering consulting practice. Last year, Don’s firm’s taxable income was \($41,000.\) During that year, he spent a great deal of
True or False: Section 179 Expense Deduction is not in force, currently.
Consider the following data for 2007 from an aftertax cash flow analysis. What is the loan interest payment for 2007 ?Before - Tax Cash Flow \(=\$ 20,000\)Loan Principal Payment \(=\$
Noise Sniffers Inc. (NSI) is a contractor to public utilities providing electrical service to homes and businesses. Most small- and midsized municipal utilities do not have the expertise or the
Matrix Service Company is an industrial service contractor with a strong reputation in refining, power, petrochemicals, gas/LNG, and related areas. Their base taxable income is $19.2 million on sales
TenTec in Sevierville, Tennessee, makes commercial and amateur radio equipment, including receivers, transceivers, antenna tuners, linear amplifiers, and so on. Their taxable income last year was
Westwood Specialties had an increase in taxable income of $5,000,000 this year. Their increase in taxes was exactly $1,720,000.a. What was their taxable income last year?b. What was their total
West Mountain Radio, an electronics firm specializing in equipment interfaces, had been in a marginal tax bracket of 39 percent and then this year had an increase in taxable income of \($150,000.\)
Pneumatics, a start-up firm of four persons, had an increase in taxable income of $20,000 this year. Their increase in taxes was exactly $6,350.a. What was their taxable income last year?b. What was
Acme Universal is a micro-cap that had a \($3,000,000\) drop in taxable income this year. Their drop in taxes was \($1,030,000.\) For each of the following, determine the largest amount that meets
Raytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for
A subsidiary of AEP places in service electric generating and transmission equipment at a cost of \($3,000,000. The\) equipment is expected to last 30 years with a salvage value of \($250,000.\) The
Bell’s Amusements purchased an expensive ride for their theme and amusement park situated within a cityowned expo center. Bell’s had a multiyear contract with the expo center. The ride cost
Milliken uses a digitally controlled dyer for placing intricate and integrated patterns on manufactured carpet squares for home and commercial use. It is purchased for \($400,000.\) It is expected to
Suppose Milliken has an opportunity with similar cash flows to those in problem 21 for a digitally controlled dyer, although there are no depreciable items. They can invest in a marketing study by a
AgriGrow is to purchase a tractor for over-the-road hauling for \($90,000.\) It is expected to be of use to the company for 6 years, after which it will be salvaged for \($4,000.\) Transportation
AgriGrow can invest in a 100-day short-term project with similar cash flows to those in problem 23 costing \($90,000\) to improve customer service. They believe the return on the project will be a
Henredon purchases a high-precision programmable router for shaping furniture components for \($190,000.\) It is expected to last 12 years and have a salvage value of \($5,000.\) It will produce
Henredon can spend \($190,000\) now, similar to the investment in problem 25, for a design portfolio with a different furniture look inspired by some of the ultramodern culture in the metropolitan
A portable concrete test instrument used in construction for evaluating and profiling concrete surfaces (MACRSGDS 5-year property class) is under consideration by a construction firm for \($22,000.\)
A virtual mold apparatus for producing dental crowns permits an infinite number of shapes to be custom constructed based upon mold imprints taken by dentists. Two models are available. One costs
A granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for \($70,000\) with \($3,000\) salvage
Two concrete test instrument investment alternatives qualify for different property classes. Investment A has a cost of \($22,000,\) a useful life of 6 years with a salvage value of \($2,000\) at
Two investments involving a virtual mold apparatus for producing dental crowns qualify for different property classes. Investment A has a cost of \($58,500,\) lasts 9 years with no salvage value, and
Two investments involving a granary qualify for different property classes. Investment A costs \($70,000\) with \($3,000\) salvage value after 16 years and is depreciated as MACRS-GDS in the 10-year
Ben Alexander, an enterprising young engineering graduate who worked part-time as a machinist during college, decided to establish his own mechanical design and specialty manufacturing business after
Griffin Dewatering is considering three alternatives. The first is the purchase of a permanent steel building to house their existing equipment for the overhaul of dewatering systems (engines, pumps,

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