Bond Corporation Is Considering the Purchase of an Asset for $400,000

question 88

Multiple Choice

Bond Corporation is considering the purchase of an asset for $400,000. It is expected that the product manufactured by the equipment can be sold for $150,000 and there will be annual production costs, exclusive of depreciation, equal to $80,000. The asset will have a 10- year life, no terminal salvage value, and straight- line depreciation will be used for tax purposes. The tax rate applicable to the company is 30%. The total net annual after- tax effect on cash resulting from the investment is a:

• A) $12,000 inflow
• B) $49,000 inflow
• C) $61,000 inflow
• D) $21,000 inflow

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Definitions:

Miranda Rights

The legal rights given to individuals in the United States during arrest, including the right to remain silent and the right to an attorney.

Double Jeopardy

A legal principle that prohibits someone from being prosecuted twice for the same offense, ensuring protection against multiple punishments.

Civil Rights Movement

A social movement in the United States during the 1950s and 1960s aimed at ending racial discrimination and securing African Americans' legal rights.

Fourteenth Amendment

An amendment to the U.S. Constitution guaranteeing equal protection under the law to all citizens and outlining the rights of citizens.