In the First Two Years of Operations, a Company Reports

question 7

Multiple Choice

In the first two years of operations, a company reports taxable income of $200,000 and $250,000, respectively. During these first two years, the tax rates were 30% and 35% respectively. It is now the end of the third year, and the company has a loss of $260,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 40%. The amount of income tax receivable in the current (third) year is:

• A)$104,000
• B)$81,000
• C)$147,500
• D)$91,000

Grasp the principles of discounted cash flow (DCF) and their use in investment decisions.

Understand the concept of net present value (NPV) and profitability index as methods of investment appraisal.

Learn the methodologies for calculating the discounted payback period.

Understand the concept and calculation of average accounting rate of return (AARR).

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Definitions:

True Ribs

The upper seven pairs of ribs that are directly attached to the sternum by their costal cartilages, providing protection to the thoracic cavity.

Sternum

A long flat bone located in the center of the chest, which connects to the ribs via cartilage and protects vital organs like the heart and lungs.

Attach Directly

Refers to a way in which structures, such as muscles or ligaments, connect with other structures without intermediaries.

Vertebral Foramen

The central opening or hole in each vertebra of the spine through which the spinal cord passes.