1. You purchase a machine for $200,000 which belongs in a 30% CCA class. What is the present value of the CCA tax shield on the machine if it is sold at the end of the sixth year for $24,000, your tax rate is 34%, and the appropriate discount rate is 10%?
a. $46,557
b. $86,994
c. $40,143
d. $66,623
e. $45,227
2. Bob's Toys has a fixed asset turnover rate of 1.2 and a total asset turnover rate of .84. Gerold's Toys has a fixed asset turnover rate of 1.1 and a total asset turnover rate of .96. Both companies have similar operations. Bob's Toys:
a. is generating $1 in sales for every $1.20 in net fixed assets.
b. is using its total assets less efficiently than Gerold's Toys.
c. has $.84 in total assets for every $.96 Gerold's has in total assets.
d. is generating $1.20 in net income for every $1 in net fixed assets.
e. is using its fixed assets less efficiently than Gerold's Toys.