How to calculate the gain or loss on the sale of a machine

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Reference no: EM132659053

Problem 1: Concluding the Justice League problem, now consider the gain or loss on the sale of the X-1600 Wall-E compactor and assuming that 5 years of useful life remain on the machine. Would the inclusion of the amount of gain or loss change the decision made in the question above? Note: this is a "throw back question" and requires that you remember how to calculate the gain or loss on the sale of a machine. DO NOT make any assumptions regarding the tax treatment for the gain or loss on the disposal of the EVE-1000 after its useful life has expired (year 5). The only modifier specifically to the sale of the X-1600 Wall-E.

[A] BOGUS QUESTION: The Gain/Loss on the sale of the X-1600 is not relevant to the decision to buy or not buy the new EVE-1000

[B] YES, the sale of the X-1600 creates a $41,870 positive cash flow in year 0 which changes the decision from don't buy to buy the EVE-1000

[C] YES, the sale of the X-1600 creates a negative cash flow of $41,870 which changes the decision from BUY the EVE-1000 to don't buy the EVE-1000

[D] NO the sale of the X-1600 creates a tax benefit of $11,130 in year 0 which is not sufficient to change the decision from don't buy to buy.

[E] YES, the sale of the X-1600 creates a tax benefit of $11,130 in year 0 which is sufficient to change the decision from don't buy to buy.

Reference no: EM132659053

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