1. The following data is associated with a proposed replacement project: A machine that originally cost $25,000 and was depreciated on a straight line basis has one year of its expected 5-year life remaining. Its current market value is $12,000. The corporate tax rate is 34%. The cash flow from disposing of the old machine, is: A. $12,000. B. $ 9,620. C. ($ 9,620.) D. $14,380.

Ans: B

2. According to the Modified Accelerated Cost Recovery System (MACRS), automobiles are to be placed with other assets that have a five-year class life. Assume Dallmeyer Digital bought a car in December 2004. What would be the last year in which it would take recognize depreciation on the vehicle? A. 2004 B. 2009 C. 2010 D. 2011

Ans: B

3. What is the after-tax cash flow that results from the sale of a capital asset for $150,000? Assume that it has a book value of $100,000 and a 40% tax rate. A. $150,000 B. $90,000 C. $130,000 D. $60,000 E. $170,000

Ans: C