A Company Discarded a Computer System Originally Purchased for $18,000

question 130

Multiple Choice

A company discarded a computer system originally purchased for $18,000. The accumulated depreciation was $17,200. The company should recognize a(an) :

• A) $7,200 loss.
• B) $8,000 loss.
• C) $800 loss.
• D) $800 gain.
• E) $0 gain or loss.

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Definitions:

CAPM

The Capital Asset Pricing Model is a conceptual model employed to calculate the anticipated return on an investment, taking into account both the risk associated with the investment and the time value of money.

Market Portfolio

A theoretical portfolio that includes all assets available in the market, each weighted by its market capitalization, often used in the Capital Asset Pricing Model (CAPM).

SML Relationship

The Security Market Line relationship, which represents the expected return of a security or portfolio in relation to its beta, or market risk.

Multifactor CAPM

An extension of the Capital Asset Pricing Model (CAPM) that incorporates multiple factors in the assessment of risk and expected return of an asset, beyond just the market risk.