Seneca Timber Lands Owns Several Acres of Prime Timberland

question 256

Multiple Choice

Seneca Timber Lands owns several acres of prime timberland. If the firm harvests the timber today, they could sell it for $4.5 million. However, Seneca believes that the timber will be worth $5.2 million next year. Seneca should exercise the option to:

• A) Abandon.
• B) Wait.
• C) Quit.
• D) Retire.
• E) Expand.

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Definitions:

Installment Note

A debt instrument that requires regular payments, or installments, of principal and interest over a specified period.

Fiscal Year

A one-year period used for financial reporting and budgeting, which does not necessarily coincide with the calendar year.

Principal Repayment

The portion of a loan payment that goes toward reducing the amount borrowed, not including interest.

Federal Income Tax

A tax levied by the United States federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.