Robin Company Is Considering the Purchase of a New $80,000

question 121

Multiple Choice

Robin Company is considering the purchase of a new $80,000 delivery van. The van will have a useful life of 5 years, no terminal salvage value, and tax depreciation will be calculated using the straight- line method. If the van is purchased, the company will be able to increase annual revenues by $90,000 per year for the life of the van, but out- of- pocket expenses will also increase by $60,000 per year. Assume a tax rate of 40% and a required after- tax rate of return equal to 10%. The annual net after- tax cash effect of operations, exclusive of depreciation, is a(n) :

• A) $30,000 inflow
• B) $2,000 inflow
• C) $12,000 inflow
• D) $18,000 inflow

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Definitions:

Psychokinesis

The supposed ability to move or manipulate objects with the mind without physical interaction.

Subliminal Perception

The process by which stimuli are presented below the threshold of conscious awareness but still influence thoughts, feelings, or actions.

Acupuncture

Use of pins to diminish pain, possible because of stimulation of release of endorphins and cortisol.

Kinesthesis

The sensory system's ability to detect body position and movement, enabling coordination and balance.