People's Construction Company Has Set a 15% Required Minimum Rate

question 37

Multiple Choice

People's Construction Company has set a 15% required minimum rate of return.The company's CFO is considering investing in a $125,000 crane that is expected to generate $25,000 of additional operating income.People's weighted-average cost of capital is 10% and its tax rate is 30%.What is the crane's EVA?

• A)$5,000
• B)$12,500
• C)$17,500
• D)$100,000

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Definitions:

Cartoonists' Labor

The work performed by individuals skilled in creating cartoons, whether for animation, comics, or other media forms.

Cheapest Way

This refers to the method or strategy that incurs the lowest cost to achieve a particular outcome or objective.

Short-Run Total Cost

The total of all costs incurred in the production of goods or services in the short term, including both fixed and variable costs.

Short-Run Average Cost

The total cost of production (fixed and variable costs) divided by the quantity produced, over the short term where some factors of production are fixed.