Question
1) A firm has a machine it can sell for $50,000. The book value of the machine is $20,000 at the moment. If the firm
1) A firm has a machine it can sell for $50,000. The book value of the machine is $20,000 at the moment. If the firm sells the machine today, what is the tax implication from the sale of the machine? Assume that the tax rate is 40%. Round to the nearest penny. If tax liabilities, type a negative sign in front. Do not include a dollar sign in your answer. (i.e. If your answer is tax liabilites of $8,765,43, type -8765.43; if tax shield of $8,765.43, type 8765.43).
2) A company is thinking to sell an asset since it will be replaced by a higher capacity one. The estimated sale price of the asset is $300,000 while the asset has depreciated to the salvage value of $500,000. If the company has the marginal tax rate of 35%, what is the tax implication of the sale of this asset? Round to the nearest penny. If tax liabilities, type a negative sign in front. Do not include a dollar sign in your answer. (i.e. If your answer is tax liabilites of $8,765,43, type -8765.43; if tax shield of $8,765.43, type 8765.43).
3) A firm is planning to purchase a new machine to replace old. The cost of machine is $400,000, shipping is $50,000 and installation is $30,000. Also the company has to train employees in order to operate the machine which cost the firm another $100,000. The company spent $50,000 for the marketing and another $20,000 for consulting previously. The company can sell the old machine for $100,000 while it has the book value of $0. The new project requires the company to invest in working capital that is $70,000. If the companys marginal tax rate is 40%, what is the initial outlay of replacing the machine? Round to the nearest penny. Do not include a dollar sign in your answer. Type the absolute value of the answer. (i.e. If your answer is -$20,000 since it is cost to replace, type 20000 as your answer.)
4) The cost of new machine is $220,000. The cost of shipping is $10,000 and of installation is $20,000. The required working capital is $25,000. Using the 3-year MACRS schedule, determine the depreciation expense in year 2. Round to the nearest penny. Do not include a dollar sign.
Year | 3-YR MACRS |
---|---|
1 | 33.33% |
2 | 44.45% |
3 | 14.81% |
4 | 7.41% |
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