A corporation is selling an existing asset for $21,000. The asset, when purchased, cost $10,000, was being depreciated under MACRS using a five-year recovery period, and has been depreciated for four full years. If the assumed tax rate is 40 percent on ordinary income and capital gains, the tax effect of this transaction is

$0 tax liability

$7,560 tax liability

$4,400 tax liability

$7,720 tax liability

A common approach of estimating the variability of returns involving forecasting the pessimistic, most likely, and optimistic returns associated with the asset is called

marginal analysis

sensitivity analysis

break-even analysis

financial statement analysis

The capital impairment restrictions are established to

reduce dividends equal to or below the current earnings level

constrain the firm to paying dividends which do not require additional borrowing

protect the shareholder

provide a sufficient base to protect creditors' claims