Use the Information Below to Answer the Following Questions

question 31

Multiple Choice

Use the information below to answer the following questions.
Y3 Ltd is expanding its production of binoculars. The plant is expected to cost $750,000 and have a life of 5 years and a nil residual value. It will be ready for operation on 31 December 2014. The following income statement figures for the new binoculars are forecast: Depreciation has been calculated on a straight-line basis. You should assume that all cash flows occur at the end of the year in which they arise. The company's cost of capital is 10%. Ignore taxation.
-Refer to the table above. The annual depreciation charge for the project is:

• A) $300,000
• B) $150,000
• C) $250,000
• D) $200,000

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Definitions:

Cost of Money

Refers to the interest rate or the opportunity cost of borrowing or using money.

Car Dealer

A business that sells new or used cars at the retail level, typically based on a dealership contract with an automaker or sales subsidiary.

Lease

A contractual agreement where one party, the lessor, grants the other party, the lessee, the right to use an asset for a specified period in exchange for payment.

Discount Rate

A rate used to determine the present value of future cash flows; in monetary policy, it refers to the interest rate charged to commercial banks for loans from a central bank.