Author Question: A corporation is selling an existing asset for 1,700. The asset, when purchased, cost 10,000, was ... (Read 38 times)

bclement10 · **on:** Jul 11, 2018

A corporation is selling an existing asset for 1,700. 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 ________.
A) 0 tax liability
B) 840 tax liability
C) 3,160 tax liability
D) 3,160 tax benefit

Question 2

Assuming the firm plans to pay out all of its earnings as dividends, the weighted average cost of capital is ________. (See Table 9.2 )

A) 10.44 percent
B) 10.9 percent
C) 11.6 percent
D) 12.1 percent