Managerial Accounting: 58. At the end of a five-year life, a company will dispose of an...
Managerial Accounting:
58. At the end of a five-year life, a company will dispose of an asset and recognize a gain of $6,000. If the company's cost of capital is 15 percent and its tax rate is 30 percent, what is the present value of the future cash flow? a. $14,078. b. $6,000. c. $2,087. d. $895
. ANS: C $2,087
Please explain and show all work.
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AS FOR GIVEN DATA...
| Present value of the future cash flow | FV×(1÷(1+r)^n) | ||
| Here, | |||
| A | rate per annum | 15.00% | |
| B | Number of years | 5 | |
| C | Number of compoundings per per annum | 1 | |
| A÷C | rate per period ( r) | 15.00% | |
| B×C | Number of periods (n) | 5 | |
| Cash flows value in 2 years (FV) | $ 4,200 | =6000*(1-30%) | |
| Present value of the future cash flow | $ 2,087 | ||
| 4200×(1÷(1+15%)^5) |
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Managerial Accounting:
58. At the end of a five-year life, a company will dispose of an...
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