A firm pays $5,000,000 to acquire a piece of machinery. The purchasing firm has agreed to pay installation charges of $100,000. The machine has a useful life of 7 years and is depreciated using straight-line depreciation method. Assume there is no salvage value.

(a) What amount is capitalized on the balance sheet under long-term assets?

A. $5,100,000

B. $4,900,000

C. $100,000

D. $5,000,000

B.) What fraction of the asset will be expensed via depreciation expense each year?

A. $714,285.71

B. $700,000

C. $72,8571.43

D. $100,000

(c) What is the book value of the machine at the end of year 2?

A. $3,571,428.57

B. $4,285,714.29

C. $3,000,000

D. $3,642,857.14

(d) If the firm decides to sell the asset at the end of year 2 for $3,800,000, what is the firm's after-tax cash flow from the asset sale? The firm's tax rate is 35%.

A. $3,800,000

B. $3,745,000

C. $3,642,857.14

D. $1,300,000