Tex Corporation Trades in a Class 10 (30%) Asset During

question 77

Essay

Tex Corporation trades in a class 10 (30%) asset during the current year. The opening UCC balance in the class 10 pool is $420,000. Tex trades in an asset for $25,000, which he sets off the $125,000 he pays for a new class 10 asset. The tax marginal rate is 35%. The nominal after-tax rate of return is 10%.
a. Calculate the UCC balance at the end of the year.
b. Calculate the tax shield on the trade in.
c. Calculate the NPV cash outflow on the trade in.

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Definitions:

Norepinephrine

A neurotransmitter and hormone involved in the body's fight or flight response, affecting heart rate, blood pressure, and blood sugar.

Erythropoietin

A hormone produced by the kidneys that stimulates the production of red blood cells in the bone marrow.

Mineralcorticoids

A class of steroid hormones that regulate electrolyte and water balance by the kidneys.

Testosterone

A primary male sex hormone that plays key roles in the development of male reproductive tissues and secondary sexual characteristics.