Question

4. Use the depreciation table below to answer the questions that follow:
a. Assuming a seven year asset has an original cost of $500,000. The asset is sold for
$200,000 at the end of year 4. Calculate the net proceeds from the sale (30% tax rate).
b. Assume a five year asset has a cost of $350,000 and is sold at he end of year 3 for
$112,000. Calculate the net proceeds form the sale (30% tax rate).
c. Assume a five year asset costs $700,000. This asset is replacing a seven year asset at
the end of year four with an original cost of $500,000. The old asset will be sold for $
$310,000. Assuming a 21% tax rate, and an addition to working capital of $25,000,
calculate cash flow in year zero.
Recovery	15	28	55
Year	5	7	10
1	20%	14%	10%
2	32%	25%	18%
3	19%	18%	14%
4	12%	12%	12%
5	12%	9%	9%
6	5%	9%	8%
7	9%	7%
8	4%	6%
9	6%
10	6%
11	4%
Totals	100%	100%	100%

Answer 1