Winslow, Inc

question 322

Multiple Choice

Winslow, Inc. is considering the purchase of a $225,000 piece of equipment. The equipment belongs in a 30% CCA class. The company expects to sell the equipment after four years at a price of $50,001. What is the after-tax cash flow from this sale if the tax rate is 35% and the firm does not have any other assets in the class?

• A) $37,036
• B) $38,880
• C) $46,108
• D) $47,770
• E) $55,460

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Definitions:

CCA

Capital Cost Allowance; a tax deduction in Canada for the depreciation of tangible property.

Earnings Before Interest And Taxes

A measure of a firm's profit that includes all income and expenses except interest and income tax expenses.

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders or owners as dividends.

Net New Equity

The amount of equity capital a company raises through the issuance of new shares minus any shares it has bought back, reflecting the net increase in share capital.