Magellen Industries Is Analyzing a New Project

question 375

Multiple Choice

Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value.
Required rate of return: 15%
Marginal tax rate: 35%
What is the net income under the worst-case scenario?

• A) -$11,575
• B) -$7,524
• C) $1,316
• D) $4,051
• E) $7,524

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Definitions:

Projection

In psychology, a defense mechanism in which an individual ascribes their own unacceptable thoughts, feelings, or motives to another person. In business, it often refers to the estimation or forecasting of future trends based on current data.

Impression Management

Strategies individuals or organizations use to influence the perceptions of others, often to appear more favorable or competent.

Personal Attributes

Characteristics or qualities that define an individual's personality and behavior.

Fundamental Attribution Error

Overestimates internal factors and underestimates external factors as influences on someone’s behaviour.