1. A corporation has decided to replace an existing machine with a newer model. The old machine had an initial purchase price of? $35,000, and has? $20,000 in accumulated depreciation. If the? 40% tax rate applies to the corporation and the old asset can be sold for? $10,000, what is the tax on sale when the old machine is? sold?
A. refund of? $2,000
B. loss of? $4,000
C. loss of? $2,000
D. no effect
2. Which of the following would be the best combination for Rate-of-Return on a stock investment?
a) high multiple on purchase date, low multiple on sale date
b) high multiple on purchase date, high multiple on sale date
c) low multiple on purchase date, high multiple on sale date
d) low multiple on purchase date, low multiple on sale date