Tex Corporation Trades in a Class 10 (30%) Asset During

Essay

Tex Corporation trades in a class 10 (30%) asset during the current year. The opening UCC balance in the class 10 pool is $420,000. Tex trades in an asset for $25,000, which he sets off the $125,000 he pays for a new class 10 asset. The tax marginal rate is 35%. The nominal after-tax rate of return is 10%.
a. Calculate the UCC balance at the end of the year.
b. Calculate the tax shield on the trade in.
c. Calculate the NPV cash outflow on the trade in.