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:

Investing Activities

Transactions involving the purchase or sale of long-term assets and other investments, part of a company's cash flow analysis.

Investing Activities

Financial activities related to the acquisition or sale of long-term assets and other investments that are not equivalent to cash.

Indirect Method

A cash flow statement preparation approach that adjusts net income for changes in non-cash accounts to compute cash flow from operating activities.

Direct Method

The direct method is a way of preparing cash flow statements where actual cash flows from operating activities are reported instead of adjustments from net income.