Wilson Corp Is Considering the Purchase of a New Piece

question 23

Multiple Choice

Wilson Corp is considering the purchase of a new piece of equipment.The cost savings from the equipment would result in an annual increase in net income after tax of $50,000.The equipment will have an initial cost of $600,000 and have an 8 year life.The salvage value of the equipment is estimated to be $100,000.If the hurdle rate is 10%,what is the internal rate of return?

• A)less than zero
• B)between zero and 10%
• C)between 10% and 15%
• D)more than 15%

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Definitions:

Credit

A direct reduction of tax owed, not just a reduction of taxable income, which can also refer to borrowing capacity in financial contexts.

Credit for the Elderly

A tax credit available to taxpayers aged 65 and older, aimed at reducing the tax liability for qualified individuals.

Permanent Disability

A condition where an individual is unable to work and earn income due to a long-term injury or illness, often leading to eligibility for certain benefits.

Child Tax Credit

A tax benefit offered to taxpayers for each qualifying child, aimed at reducing the tax liability and potentially increasing the tax refund.