19. Suppose a firm owns a machine with current book value of $16,000. What is th

Question

19. Suppose a firm owns a machine with current book value of $16,000. What is the after tax cash flow if the firm sells the machine today for $24,000 and the firm's marginal tax rate is 28-percent? A) $13,760 B) S16,000 C)$17,760 D) $21,760 E) $24,000 20. Suppose that a project costs $100 and has cash flows of $14 at the end of each of the next four years and a cash flow of $116 at the end of five years. The project's Internal Rate of Return (IRR) is: A) Greater than 14% B) Less than 14% C) Exactly 14% D) Unknown without cost of capital E) None of the above

Explanation / Answer

19)

Book value of assets $    16,000 Sale value of machine $    24,000 Profit/(Loss) on sale $      8,000 Less: Tax @ 28% $      2,240 After tax salvage value of asset $    21,760

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