If Joel Earns a 10 Percent After-Tax Rate of Return

question 96

Multiple Choice

If Joel earns a 10 percent after-tax rate of return, $10,000 received in two years is worth how much today? Use Exhibit 3.1. (Round discount factor(s) to three decimal places.)

• A)$10,000
• B)$9,090
• C)$8,260
• D)$11,000
• E)None of the choices are correct.

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Definitions:

Direct Labor

The labor costs directly tied to the production of goods or the provision of services.

Variable Costs

Expenses that vary directly with the production output or activity levels.

Break-Even Sales

The amount of revenue needed to cover total costs, at which point a business neither makes a profit nor incurs a loss.

Margin of Safety

Represents the difference between actual or planned sales and the break-even sales, indicating the amount by which sales can drop before the business incurs a loss.