An Asset Used in a Three-Year Project Falls in the Three-Year

question 29

Multiple Choice

An asset used in a three-year project falls in the three-year MACRS class for tax purposes.The MACRS percentage rates starting with Year 1 are: 33.33, 44.45, 14.81, and 7.41.The asset has an acquisition cost of $2.6 million and will be sold for $1.1 million at the end of the project.If the tax rate is 34 percent, what is the aftertax salvage value of the asset?

• A)$742,519.10
• B)$726,000.00
• C)$832,056.60
• D)$791,504.40
• E)$887,560.15

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Definitions:

Expected Value

The weighted average of all possible outcomes of a random variable, with weights being their respective probabilities of occurrence.

Weighted Average

A calculation that takes into account the different weights or importance of some elements in a data set, providing a mean value that reflects these weights.

Standard Deviation

A numerical indicator that calculates the degree of spread or deviation of data points from their average.

Payoffs

The outcomes or benefits received from a particular action or decision, often used in the context of game theory.