A Firm Has a General-Purpose Machine, Which Has a Book

question 67

Multiple Choice

A firm has a general-purpose machine, which has a book value of $300,000 and is sold for
$500,000 in the market. If the tax rate is 35%, what is the opportunity cost of using the machine in a project?

• A) $500,000
• B) $430,000
• C) $300,000
• D) None of the above

Apply understanding of future value and present value concepts to make informed financial decisions regarding loans, savings, and investments.

Understand the concept of compounding interest semiannually, quarterly, and in other non-annual periods.

Recognize the use of annuities in calculating values of periodic payments, either for saving or loan repayments.

Demonstrate the ability to solve real-world problems involving single sums and annuities using appropriate financial formulas.

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Definitions:

Variable Cost

Expenses that vary directly with the level of production or sales, such as materials or labor.

Target Net Profit

Target net profit is the specific amount of net income that a company aims to achieve within a certain period, guiding pricing, cost management, and sales volume strategies.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit. This figure shows how much each unit contributes to covering fixed costs and generating profit.

Fixed Costs

Expenses that do not change in total as production volume increases or decreases, such as rent and salaries.