Highlight Company Is Considering the Purchase of the Following Computer

question 37

Multiple Choice

Highlight Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes: $\begin{array}{lr}\text { Acqui sition cost } & \$ 420,000 \\\text { Annual cash flow } & \$ 140,000 \\\text { Annual operating costs } & \$ 31,000 \\\text { Expected salvage value } & \$0 \\\text { Cost of capital } & 11 \% \\\text { Tax rate } & 35 \%\end{array}$ Highlight Company plans to use Modified accelerated cost recovery system (MACRS) and keep the computer equipment for seven years.What would the MACRS deduction in Year 1 be? (Round your answer to the nearest dollar.)

• A)$72,000
• B)$84,000
• C)$60,000
• D)$68,000

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Definitions:

Junior Executives

Lower-level managerial employees who are responsible for assisting in the planning, direction, and coordination activities within organizations.

Ethics Competency

The capability to identify, assess, and act upon ethical dilemmas and issues according to moral principles in professional settings.

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Strategies and measures adopted by a financial institution to continue its operations and remain solvent during challenging times.

Likelihood of Commitment

The probability or extent to which individuals are expected to be dedicated or loyal to a cause, decision, or organization.