Tawstir Corporation Has 800 Obsolete Personal Computers That Are Carried

question 101

Multiple Choice

Tawstir Corporation has 800 obsolete personal computers that are carried in inventory at a total cost of $1,100,000. If these computers are upgraded at a total cost of $40,000, they can be sold for a total of $750,000. As an alternative, the computers can be sold in their present condition for $690,000.
-What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

• A)$20,000 advantage
• B)$20,000 disadvantage
• C)$60,000 advantage
• D)$60,000 disadvantage

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Definitions:

Borrow

To receive something of value with the promise to return it or its equivalent value at a future date.

Unlevered Cost

The cost of funding a project without any debt, reflective of the project's risk as if financed entirely by equity.

Annual Coupon

The yearly interest payment made to bondholders, typically expressed as a percentage of the bond's face value.

Tax Rate

The slice of income or profits that is claimed by the government from corporations or people in the form of taxes.