question 50

You purchase a machine for $200,000 which belongs in a 30% CCA class. What is the present value of the CCA tax shield on the machine if it is sold at the end of the fifth year for $50,000, your tax rate is 34%, and the appropriate discount rate is 10%?

Select one:

a. $86,994

b. $66,623

c. $41,964

d. $52,215

e. $40,765

question 48

Your company purchased a piece of land five years ago for $125,000 and subsequently added $275,000 in improvements. The current book value of the property is $225,000. There are two options for future use of the land: 1) the land can be sold today for $385,000 on a net after-tax basis; 2) your company can destroy the past improvements and build a factory on the land. In consideration of the factory project, what amount (if any) should the land be valued at?

Select one:

a. The property should be valued at zero since it is a sunk cost.

b. $225,000

c. $150,000.

d. $385,000.

e. $125,000.