Mrs. o is negotiating to purchase a tract of land from dc company, a
calendar year taxpayer. dc bought this land six years ago for
$480,000. according to a recent appraisal, the land is worth $800,000
in the current real estate market. according to dc’s director of tax,
the company’s profit on the sale will be taxed at 35 percent if the sale
occurs this year. however, this tax rate will definitely
decrease to 21 percent if the sale occurs next year. mrs.
o is aware that dc would prefer the sale close next year. however,
mrs. o needs the land immediately to begin construction of a new
retail outlet. she offers to pay $875,000 for the land with the
stipulation that the sale close by december 31. should dc accept
mrs. o’s offer?

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept,the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year.to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51