MACRS RATE Recovery year 3 years 5 years 7 years 10 years 20% 33% 1 14% 10% 45 32 25 18 15 19 18 14 12 12 12 12 5 7. 4 6 10 11 A corporation is evaluating the relevant cash flows for a capital budgeting decision and must estimate the terminal cash flow. The proposed machine will be disposed of at the end of its usable life of five years at an estimated sale price of $15.000. The machine has an original purchase price of $80,000, installation cost of 20,000, and will be depreciated under the five - year MACRS. Net working capital is expected to decine by $5.000. The firm has a 40 percent tax rate on ordinary income and long - term capital gain. The terminal cash flow is OA. $24.000 OB. $26.000 OC. $14,000 DD. S16.000

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Chapter1: Financial Statements And Business Decisions
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MACRS RATE
Recovery year 3 years 5 years 7 years 10 years
33%
20%
14%
10%
45
32
25
18
3
15
19
18
14
4
7
12
12
12
12
5
9
8
7
9
7
8
4.
6
9.
6
10
6
11
4
A corporation is evaluating the relevant cash flows for a capital budgeting decision and must estimate the terminal cash flow. The proposed machine will be disposed of at the end of its usable life of five years at an estimated sale price of $15,000. The machine has an original purchase price of $80,000, installation cost of
$20,000, and will be depreciated under the five - year MACRS. Net working capital is expected to decline by $5,000. The firm has a 40 percent tax rate on ordinary income and long - term capital gain. The terminal cash flow is
O A. $24,000
O B. $26.000
O C. $14,000
O D. $16,000
Transcribed Image Text:MACRS RATE Recovery year 3 years 5 years 7 years 10 years 33% 20% 14% 10% 45 32 25 18 3 15 19 18 14 4 7 12 12 12 12 5 9 8 7 9 7 8 4. 6 9. 6 10 6 11 4 A corporation is evaluating the relevant cash flows for a capital budgeting decision and must estimate the terminal cash flow. The proposed machine will be disposed of at the end of its usable life of five years at an estimated sale price of $15,000. The machine has an original purchase price of $80,000, installation cost of $20,000, and will be depreciated under the five - year MACRS. Net working capital is expected to decline by $5,000. The firm has a 40 percent tax rate on ordinary income and long - term capital gain. The terminal cash flow is O A. $24,000 O B. $26.000 O C. $14,000 O D. $16,000
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