Sample Quiz #7 Questions – based on Chapter 14
1. If
the tax rate is 32%, what is the after tax impact on
income of a short term business transaction with cash
inflows of $35,000 and cash outflows of $26,000. All
cash flows are taxation relevant.
A.
B.
C.
D.
$2,880
$9,000
$35,000
$6,120
2. If
A.
B.
C.
D.
$2,500
$1,780
$3,750
$2,670
the tax rate is 40%, what is the present value of
the tax savings from the depreciation tax shield in the
third year of the life of an asset being depreciated
using the straight-line method with no deduction for
salvage value as is typical of tax depreciation? The
cost of the asset is $50,000. The asset has an economic
life of 8 years. The time value of money rate is 12%.
A present value table is provided for use in answering
this question. ===
Present value factors for
12 % rate:
time
point
0
1
2
3
4
5
6
7
8
9
10
Q#
Answer
5/29/2016
1.
D
single amount
discount
1.000
0.893
0.797
0.712
0.636
0.567
0.507
0.452
0.404
0.361
0.322
2.
B
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