In an Internal Service Fund, the Expectation Is That

question 13

Multiple Choice

In an Internal Service Fund, the expectation is that

• A) Each year's revenues should equal each year's expenses because the revenues are simply an allocation of that year's expenses.
• B) Each year's revenues should equal each year's expenditures because the revenues are simply an allocation of that year's expenditures.
• C) Accumulated revenues over time should approximately equal the accumulated expenses over time.
• D) Expenses will exceed revenues because depreciation expense is reported in an Internal Service Fund.

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Definitions:

After-Tax Cost of Debt

The net cost of debt after accounting for the tax deductions available on interest payments.

Coupon

The interest rate on a bond that the issuer promises to pay to the holder until maturity, usually expressed as an annual percentage.

Tax Rate

The proportion of income, profits, or other bases that is paid or levied as tax by the government, typically expressed as a percentage.

Cost of Preferred Stock

The effective rate that a company pays on its issued preferred shares, calculated by dividing the dividend by the current price of the stock.