Colorform Company Is Considering the Purchase of the Following Computer

question 31

Multiple Choice

Colorform Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes: $\begin{array}{lrr}\text { Acquisition cost } & \$ 400,000 \\\text { Annual cash flow } & \$ 140,000 \\\text { Annual operating costs } & \$ 20,000 \\\text { Expected salvage value } & \$ 0 \\\text { Cost of capital } & 10 \% \\\text { Tax rate } & 40 \%\end{array}$ Colorform Company plans to use MACRS and keep the production equipment for seven years. (Round amounts to dollars.)
Tax savings from depreciation in Year 3 would be

• A)$54,400.
• B)$30,720.
• C)$22,856.
• D)$35,360.

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Definitions:

Logic Bomb

A piece of code intentionally set to execute a malicious function when specified conditions are met.

Time Bomb

A type of malware that remains inactive until a specific time or event triggers its activation, causing harm to the computer system.

Worm

A program that attempts to travel between systems through network connections to spread infections. Worms can run independently of host file execution and are active in spreading themselves.

Computer Forensics

The application of computer systems and techniques to gather potential legal evidence; a law enforcement specialty used to fight high-tech crime.