An Investment Project Is Expected to Generate Earnings Before Taxes

question 75

Multiple Choice

An investment project is expected to generate earnings before taxes (EBT) of $60,000 per year. Annual depreciation from the project is $30,000, and the firm's tax rate is 40 percent. Determine the project's annual net cash flows.

• A) $48,000
• B) $66,000
• C) $36,000
• D) $52,000

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Definitions:

Accounting Procedures

The methods and processes used to record, summarize, and report financial transactions.

Profit Margin

A financial metric expressed as a percentage that measures how much of every dollar of revenue is retained as profit after all expenses have been deducted.

Net Income

The income a company retains following the subtraction of all expenses and taxes from the gross revenue.

Sales

The total amount of goods or services sold by a company, typically reported within a specific period.