Ethan Competed in the Annual Austin Marathon This Year and Won

question 126

Multiple Choice

Ethan competed in the annual Austin Marathon this year and won a $25,000 prize for fastest wheelchair entrant. Ethan indicated that he would transfer the prize to the local hospital. How much of the prize should Hal include in his gross income?

• A) Zero because prizes from charities are excludible.
• B) Zero because prizes transferred to charities are excludible.
• C) $25,000 because all prizes are taxable.
• D) $25,000.
• E) Zero because all prizes are excludible.

Calculate unknown payments or values in complex loan and investment scenarios.

Analyze and decide between various offers or payment schedules based on economic value.

Apply time value of money principles to real-world financial decisions.

Understand the basic principles of loan calculation and repayment strategies.

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Definitions:

Operating Leverage

A financial ratio that measures the proportion of fixed costs in a company's cost structure, indicating how a change in sales volume will impact operating income.

Economic Value Added

A measure of a company's financial performance based on the residual wealth calculated by subtracting a firm's cost of capital from its operating profit.

Compensation

Payment or benefits provided in exchange for services rendered or as reimbursement for expenses, often related to employment or services provided.

Cost of Capital

The rate of return a company must earn on its investments to maintain its market value and attract funds.