Bosworth Industries Has Decided to Terminate a Table Manufacturing Project

question 30

Multiple Choice

Bosworth Industries has decided to terminate a table manufacturing project and sell the machine used to produce the tables.The machine was purchased five years ago for $280,000.It has been depreciated using straight- line depreciation over a seven- year period.Bosworth has an offer from another table manufacturer to purchase the machine for $90,000.If Bosworth pays 30% company tax,what will be the after- tax cash flow generated by the sale of the machine?

• A)$87,000
• B)$97,000
• C)$90,000
• D)$63,000

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Definitions:

Yield to Maturity

Yield to Maturity (YTM) is the total return anticipated on a bond if the bond is held until the date it matures, accounting for interest payments and principal recovery.

Par Value

The face value of a bond or stock as stated by the issuing company, not necessarily its market value.

Annual Coupon

The annual interest payment made to bondholders, typically fixed and expressed as a percentage of the bond's face value.

Income Effect

The change in an individual's or economy's income and how that change affects the quantity demanded of a good or service.