A Machine Was Purchased on January 1 for $50,000

question 51

Multiple Choice

A machine was purchased on January 1 for $50,000. The machine has an estimated useful life of 10 years with a salvage value of $2,000. Under the double-declining-balance, depreciation expense for each of the first two years is, respectively,

• A)$12,000 and $12,000.
• B)$10,000 and $8,000.
• C)$12,000 and $9,500.
• D)$12,500 and $12,500.

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Definitions:

Expected ROE

The projected return on equity, which measures a company's efficiency at generating profits from every unit of shareholder's equity.

Dividend Growth Rate

The annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time.

Plowback Ratio

The proportion of earnings retained by a company after dividends have been paid out, often used to fund growth projects.

Intrinsic Value

The actual, underlying worth of an asset, investment, or company based on fundamental analysis without regard to its market value.