Author Question: A corporation has decided to replace an existing machine with a newer model. The old machine had an ... (Read 154 times)

joesmith1212 · **on:** Apr 25, 2021

Question 1

Your lawyer presents you with a three year investment. You must invest $1,000 immediately, but you are promised after-tax cash flows of $600 after one year and another $600 after two years. What is the IRR of the investment? (Round answer to nearest percent).
◦ 10%
◦ 11%
◦ 12%
◦ 13%
◦ 14%

Question 2

A corporation has decided to replace an existing machine with a newer model. The old machine had an initial purchase price of $35,000, and has $20,000 in accumulated depreciation. If the 40% tax rate applies to the corporation and the old asset can be sold for $10,000, what will be the tax effect of the replacement?
◦ No effect
◦ Loss of $2,000
◦ Refund of $2,000
◦ Loss of $4,000

Pariscourtney · **Reply #1 on:** Apr 25, 2021

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