I know how to do 21 and 22 but I am unsure about 23. I know the
answer is D but I do not know how to get that. Thank you!

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Question: I know how to do 21 and 22 but I am unsure about 23. I know the answer is D but I do not know how…
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Question: I know how to do 21 and 22 but I am unsure about 23. I know theanswer is D but I do not know how...

Show transcribed image text The old truck was purchased two and a half years ago for S30,000 and is being depreciated using the straight-line method using the half-year convention (five year class for tax purposes). The cash operating costs of the old truck total S18,000 per year. To enable the truck to last four more years, an overhaul costing $7,000 is needed. Assume that the overhaul will be expensed for tax purposes. If the truck is overhauled, it is estimated to have a salvage value of s10,000. The new truck would cost $45,000 and is expected to have annual operating costs of $8,000. If the new truck is purchased it is expected to be disposed of at the beginning of its fifth year for S15,000. Assuming the new truck is purchased, the old truck can probably be sold "as is" for S5,000. MACRS depreciation with a five-year life will be used for the new truck. The cost of capital is 10% and the tax rate is 40%. 21. Assuming that the company overhauls the old truck, what will the total after-tax proceeds be from selling this truck at the end of its life? a. $2,000 b. $4,000 c. $6,000 d. 10,000 22. Assuming that the company overhauls the old truck, what is the depreciation tax shield in year six? a. b. $1,200 C. $2,400 d. $4,800 23. Assuming that the company purchases the new truck, what are the total after-tax proceeds from selling the old truck? What are the after-tax proceeds from selling the new truck? a.

The old truck was purchased two and a half years ago for S30,000 and is being depreciated using the straight-line method using the half-year convention (five year class for tax purposes). The cash operating costs of the old truck total S18,000 per year. To enable the truck to last four more years, an overhaul costing $7,000 is needed. Assume that the overhaul will be expensed for tax purposes. If the truck is overhauled, it is estimated to have a salvage value of s10,000. The new truck would cost $45,000 and is expected to have annual operating costs of $8,000. If the new truck is purchased it is expected to be disposed of at the beginning of its fifth year for S15,000. Assuming the new truck is purchased, the old truck can probably be sold "as is" for S5,000. MACRS depreciation with a five-year life will be used for the new truck. The cost of capital is 10% and the tax rate is 40%. 21. Assuming that the company overhauls the old truck, what will the total after-tax proceeds be from selling this truck at the end of its life? a. $2,000 b. $4,000 c. $6,000 d. 10,000 22. Assuming that the company overhauls the old truck, what is the depreciation tax shield in year six? a. b. $1,200 C. $2,400 d. $4,800 23. Assuming that the company purchases the new truck, what are the total after-tax proceeds from selling the old truck? What are the after-tax proceeds from selling the new truck? a.

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