Consider an Asset That Costs $176,000 and Is Depreciated Straight-Line

question 104

Multiple Choice

Consider an asset that costs $176,000 and is depreciated straight-line to zero over its 11-year tax life.The asset is to be used in a 7-year project; at the end of the project,the asset can be sold for $22,000.The relevant tax rate is 30 percent.What is the aftertax cash flow from the sale of this asset?

• A)$31,800
• B)$32,600
• C)$33,300
• D)$34,100
• E)$34,600

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Definitions:

Negotiable

Capable of being transferred or sold with ease and having the ability to be converted into cash or equivalent.

Interest

The cost of borrowing money, typically expressed as a percentage of the principal amount.

Nonnegotiable

Nonnegotiable describes an object or agreement that cannot be modified or transferred through negotiation, often referring to instruments like checks or securities with fixed terms.

Mortgage

A legal agreement in which property is used as collateral for a loan, with the property title transferred to the lender until the loan is repaid.