XYZ Corporation Is Contemplating the Replacement of an Existing Asset

question 134

Multiple Choice

XYZ Corporation is contemplating the replacement of an existing asset used in the operation of its business. The original cost of this asset was $28,000; since date of acquisition, the company has taken a total of $20,000 of depreciation expense on this asset. The current disposal (market) value of this asset is estimated as $18,000. XYZ is subject to a combined income tax rate, t, of 34%. What is the projected after-tax cash flow associated with the sale of the existing asset, rounded to nearest hundred dollars?

• A) $18,000.
• B) $10,000.
• C) $14,600.
• D) $8,000.
• E) $11,400.

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Definitions:

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