A Corporation Has Decided to Replace an Existing Asset with a Newer

question 25

Multiple Choice

A corporation has decided to replace an existing asset with a newer model. Two years ago, the existing asset originally cost $70,000 and was being depreciated under MACRS using a five-year recovery period. The existing asset can be sold for $30,000. The new asset will cost $80,000 and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40 percent on ordinary income and capital gains, the initial investment is ________.

• A) $48,560
• B) $44,360
• C) $49,240
• D) $27,600

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Definitions:

Buy Yuan

The action of purchasing the Chinese currency, the Yuan, as an investment or for financial transactions.

Japanese Yen

The official currency of Japan, recognized globally by its symbol ¥ or the ISO code JPY.

Indian Depositors

Individuals or entities in India who place their money in financial institutions for safekeeping and potential interest gains.

Appreciate

To recognize the full worth of something or to increase in value over time.