LISP Inc Is Planning to Purchase a New Mixer for $50,000

question 26

Multiple Choice

LISP Inc. is planning to purchase a new mixer for $50,000 that will qualify as MACRS 3-year property (first-year depreciation rate = 33.33%) . The new mixer should increase revenues by $20,000 per year, with no increase in operating cost. If LISP's marginal tax rate is 40 percent, what is the net cash flow in the first year?

• A) $22,665
• B) $19,000
• C) $18,666
• D) $21,500

Understand the concept of residual value and its significance in the context of fixed assets.

Comprehend the comprehensive components included in the acquisition cost of equipment.

Understand the methods of depreciation and how they reflect the expense allocation over the asset's useful life.

Grasp the significance of capital expenditures and how they impact financial statements.

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Definitions:

Multichannel, Multiphase System

A system that involves multiple pathways and stages through which a process or service is completed, often used in reference to service systems with different phases of customer interaction.

College Registrar's Office

The administrative office in a college or university responsible for maintaining student records, managing course registrations, and overseeing the official academic transcripts.

Finite Or Infinite

This term refers to the nature of sets or quantities, where 'finite' means it has a limit, and 'infinite' means it has no end or boundary.

Source Population

The group of individuals or entities from which a research sample is drawn for a study or analysis.