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Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
Edition 7ISBN: 978-0078136726 Exercise 30
Clean Tooth
Several years ago, your firm paid $25,000,000 for Clean Tooth, a small, high-technology company that manufactures laser-based tooth cleaning equipment. Unfortunately, due to extensive production line and sales resistance problems, the company is considering selling the division as part of a "modernization program." Based on current information, the following are the estimated accounting numbers if the company continues to operate the division:
Assume
1. The firm is in the 0 percent tax bracket (no income taxes).
2. There are no additional expenses associated with the sale.
3. After year 10, the division will have sales (and expenses) of 0.
4. Estimates are completely certain.
Should the firm sell the division for $250,000?
Several years ago, your firm paid $25,000,000 for Clean Tooth, a small, high-technology company that manufactures laser-based tooth cleaning equipment. Unfortunately, due to extensive production line and sales resistance problems, the company is considering selling the division as part of a "modernization program." Based on current information, the following are the estimated accounting numbers if the company continues to operate the division:
Assume1. The firm is in the 0 percent tax bracket (no income taxes).
2. There are no additional expenses associated with the sale.
3. After year 10, the division will have sales (and expenses) of 0.
4. Estimates are completely certain.
Should the firm sell the division for $250,000?
Explanation
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Conceptual background
The decision whet...
Accounting for Decision Making and Control 7th Edition by Jerold Zimmerman
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