312MidSample

312MidSample - Sheet1 BUS312 Sample mid term exam. Ver A...

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Sheet1 Page 1 BUS312 Sample mid term exam. Ver A Question #1 CCA Rate 20% UCC 100000 Net acquisitions 10000 Tax rate 40% Additional taxable income 21000 Cancelled by capital gain of 28000 Only sale purchase price 15000 Selling price 43000 Question #2 Question #3 Current assets 200 Current ratio 1.25 COGS % of sales 75% Current liabilities 160 a. Current assets 250 Current liabilities 160 Current ratio 1.56 b. Current assets 212.5 Current liabilities 160 Current ratio 1.33 c. Current assets 150 Current liabilities 110 Current ratio 1.36 d. Current assets 250 What the CEO means : If one sells the asset for less, then the recaptured depreciation will be less. This will reduce the taxes to be paid. Taxes paid are a cash flow out of the firm, hence a reduction in the taxes to be paid will result in more cash staying within the firm, hence the firm will not run out of cash. What the CEO has not considered : Selling for less will save taxes and result in less cash going out of the firm to the taxman, but it will also result in less cash
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This note was uploaded on 05/07/2010 for the course BUS 312 taught by Professor Alan during the Summer '03 term at Simon Fraser.

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312MidSample - Sheet1 BUS312 Sample mid term exam. Ver A...

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