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:

Biomass Energy

Biomass energy involves producing energy by burning organic materials, such as wood, agricultural crops, and waste materials, in a process that can be more sustainable than fossil fuels.

Developing Countries

Nations with lower levels of industrialization, lower standards of living, and generally lower Human Development Index (HDI) scores compared to developed countries.

Biomass Energy

Energy produced by burning organic materials, such as wood, agricultural crops, or animal waste.

Developing Countries

Nations with a lower level of industrialization, lower living standards, and lower Human Development Index (HDI) compared to developed countries.