If the selling price of an asset at disposal is less than its book value, then the after-tax cash flow is the selling price minus the tax on the gain. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: If the selling price of an asset at disposal is GREATER […]
Date: September 19th, 2020
Eastern Inc. purchases a machine for $70,000. This machine qualifies as a five-year recovery asset under MACRS with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. The firm has a tax rate of 40%. If the machine is sold at the […]
Date: September 19th, 2020
Southwest Co. purchases an asset for $60,000. This asset qualifies as a seven-year recovery asset under MACRS. Winston has a tax rate of 30%. The seven-year fixed depreciation percentages for years 1, 2, 3, 4, 5, and 6 are 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, and 8.93%, respectively. If the asset is sold at the end […]
Date: September 19th, 2020
The leading piece of theoretical research in corporate finance is Myers and Majluf (1984). They showed that when there is information asymmetry between the market and managers, a pecking order emerges in terms of how the firm should obtain funds for capital investments. Specifically, a firm would prefer to use: a. debt, then retained earnings, […]
Date: September 19th, 2020
When current assets exceed current liabilities, a firm has negative net working capital. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Northern Co. purchases an asset for $50,000. This asset qualifies as a five-year recovery asset under MACRS, with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. Northern has a tax rate of 35%. If the asset is sold at the end […]
Date: September 19th, 2020
Southern Inc. purchases an asset for $150,000. This asset qualifies as a five-year recovery asset under MACRS with the fixed depreciation percentages as follows: year 1 = 20.00%; year 2 = 32.00%; year 3 = 19.20%; year 4 = 11.52%. Southern has a tax rate of 35%. If the asset is sold at the end […]
Date: September 19th, 2020
Fully depreciated assets ________ , and so any proceeds from sale at disposal are taxable gains. A) always have a market value of zero B) have a positive book value C) have a negative market value D) have a book value of zero ANSWER Answer: D
Date: September 19th, 2020
Under the Securities Exchange Act of 1934, Congress created the Securities and Exchange Commission (the ‘SEC’). The SEC’s mission is to administer federal securities laws and issue rules and regulations to provide protection for investors and to ensure that the securities markets are fair and honest. This is accomplished primarily by: a. creating a national […]
Date: September 19th, 2020
Net working capital can be defined as the portion of a firm’s current assets financed with long-term funds. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
