Question 7-8, Please NO Excel, show all work including formulas/equations used.

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Question 7-8, Please NO Excel, show all work including formulas/equations used. Thank you!

6. An industrial machine was purchased for $500,000, and an additional $50,000 was required for site prep and installation labor. The freight for the delivery was $10,000. The company received a trade-in allowance of $75,000 on an old machine which had a book value of 60,000. What is the cost basis of this asset for depreciation purposes? a. $500.000 b. $560,000 c. $500,000 d. $485.000 e. $545,000 7. Given the sensitivity graph below, which of the following statements is most accurate? 6 150 Var a IfI can only concentrate on getting the best forecasts of one variable, it should be b. If I expect up to + 25% error may exist in my forecast for all of these variables, c. Making sure I have a good estimate of Variable D is extremely important in d. Variable B is the sales revenue in this example. Variable A because it has the largest negative slope. the acceptance of this project may be at risk. planning this project. 8. At the end of a project's life, an asset will be disposed. will show a small gains tax credit (positive cash flow). Which of these statements must be true? The project's cash flow statement a. The asset will be sold for less than its book value. b. The asset will be sold for more than its book value but less than its original cost. c. The asset will be sold for more than its original cost d. The asset was sold for the exact amount of its book value. e. There is not enough information to answer this question.

Explanation / Answer

Hey there!!

You have doubts in 2 questions, q7 and q8...

Lets discuss q8 first.

In the question it is given that in the end of project life, an asset will be disposed, and there will be a small capital gains tax credit which means positive inflow ie. Cash Inflow.

This means that there will be Cash inflow due to Tax Savings on account of loss on sale of asset.

This makes us conclude that the asset was sold at a price less than its book value.

So the Correct option is A.

q7. Part 7 of the question seems incompelete because there is no graph attached from which we can answer the question...you may attach it and we can then discuss...

So, i hope your other query is solved....do let me know if you havr any other doubts !! happy studying :)

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