final - View Results Final Exam Name: Hussein Bzeih...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
View Results Final Exam Name: Hussein Bzeih Attempt: 1 / 1 Out of: 30 Started: May 15, 2010 4:00pm Finished: May 15, 2010 5:41pm Time spent: 1 hr, 41 min., 55 sec. Student finished 18 min. 5 sec. ahead of the 120 min. time limit. Question 1 (3 points) (Chapter 17) An overland freight company has purchased new trailers for $200,000 and expects to realize a net $100,000 in gross income over operating expenses for each of the next 3 years. The trailers have a recovery period of 3 years. Assume an effective tax rate of 30% and an interest rate of 10% per year. One is interested in two issues: a) calculate the advantage of accelerated depreciation by calculating the present worth of taxes for the MACRS method versus the classical SL method. Since MACRS takes an additional year to fully depreciate the basis, assume no CFBT beyond year 3, but include any negative tax as a tax savings. b) calculate the total taxes of both methods and compare them. Select the correct answer. Student response: Percent Value Correct Response Student Response Answer Choices 100.0% a. both for the SL and the MACRS method Taxes per year are TI multiplied by the effective tax rate 0.0% b . both for the SL and the MACRS method Taxes per year are TI multiplied by 10% 0.0% c. TI for year t = CFAT of year t – D of that year 0.0% d . The depreciation rate for both the SL and MACRS method need to have a subscript t to represent the year Score: 3 / 3 Question 2 (3 points)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
(Chapter 17) An overland freight company has purchased new trailers for $200,000 and expects to realize a net $100,000 in gross income over operating expenses for each of the next 3 years. The trailers have a recovery period of 3 years. Assume an effective tax rate of 30% and an interest rate of 10% per year. One is interested in two issues: a) calculate the advantage of accelerated depreciation by calculating the present worth of taxes for the MACRS method versus the classical SL method. Since MACRS takes an additional year to fully depreciate the basis, assume no CFBT beyond year 3, but include any negative tax as a tax savings. b) calculate the total taxes of both methods and compare them.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

final - View Results Final Exam Name: Hussein Bzeih...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online