A Policy Is Approved That Requires a Company near a Large

question 22

Multiple Choice

A policy is approved that requires a company near a large city to keep its smokestack pollution to new lower levels,costing the company $2 million in additional equipment which will last at least 10 years) and $100,000 a year in additional labor.Lowering the air pollutants in the region is expected to save $4 million in medical expenses in the region over the next 10 years.Which of the following can be inferred from this information?

• A)The company appears to lose money because of the policy,but it may decide to pass the costs along to consumers.
• B)The company will save approximately $1 million over the next 10 years by implementing the new equipment.
• C)The cost of the new equipment outweighs the benefit of its implementation.
• D)Taxpayers will save approximately $1 million if the company implements the new equipment.

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Definitions:

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Inventory Forecast

The process of estimating the amount of inventory a company will need over a future period based on historical sales data, seasonality, and market trends.

Regression Line

A statistical method used to describe the relationship between a dependent variable and one or more independent variables, usually represented as a straight line on a graph.

Dividend Payout Ratio

The percentage of a company's earnings distributed to its shareholders in the form of dividends.