Global industries (GI) is planning to use some existing equipment from its own facilities in a foreign project. The used equipme
nt has a book value of $2 million but a market value of $6 million. If GI's marginal tax rate is 34%, what is its opportunity cost of using the used equipment in the foreign project?
a) $2 million
b) $3.25 million
c) $6 million
d) $4.64 million
a) $2 million
b) $3.25 million
c) $6 million
d) $4.64 million
1 answer:
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Answer:
Net Assets = Total Liabilities - Total Assets
Transaction # 1
Cash comes under Permanantly Restricted Net Assets
Hence -
Net Assets = $50,000 - $50,000 = $0
Transaction # 2
As there was no transaction took place hence nothing to be reported.
Transaction # 3
Inventory comes under supply & its temporarily restricted net assets
Hence
Net Assets = $1750 - $1750 = $0
Transaction # 4
Advertising comes under Permanently Restricted Net Assets
Hence
Net Assets = $0 - (-$5000) = $0 + $5000 = $5000
Transaction # 5
Office Equipments comes under Temporarily Restricted Net Assets
Hence
Net Assets = Total Liabilites - Total Assets
= $ 5000 - [ - $5000 + $10000 ]
= $ 5000 - $5000 = $0
Hence ending balance is
Unrestricted Net Asstes = $0
Temporarily Restricted Net Asstes = $0
Permanently Restrcited Net Asstes = $5000
Explanation:
See attached file for table
