In 2017, Beth Sold Equipment Used in Her Business

question 106

Multiple Choice

In 2017, Beth sold equipment used in her business. Her basis in the property was $300,000 ($500,000 cost less $200,000 of depreciation) . Beth sold the property for $400,000, with $100,000 due on the date of the sale and $300,000 (plus interest at the Federal rate) due in 2018. Beth's recognized gain from the installment sale in 2017 is:

• A)$0.
• B)$50,000.
• C)$100,000.
• D)$200,000.
• E)None of the above.

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Definitions:

Bond-Yield-Plus-Risk-Premium

A method of estimating the cost of equity by adding a risk premium to the observed yield of a company’s long-term debt.

WACC

An assessment of a firm's cost of capital, where each category of capital is proportionally weighted to calculate the average cost.

Marginal Costs

Marginal costs refer to the change in total cost that arises when the quantity produced is incremented by one unit.

Target Capital Structure

Target capital structure is the proportional combination of debt, equity, and other financing sources a company aims to maintain.