Last Year,Michelson Manufacturing Reported $10,250 of Sales,$3,500 of Operating Costs

question 8

Multiple Choice

Last year,Michelson Manufacturing reported $10,250 of sales,$3,500 of operating costs other than depreciation,and $1,250 of depreciation.The company had no amortization charges,it had $3,500 of bonds outstanding that carry a 6.5% interest rate,and its federal-plus-state income tax rate was 35%.This year's data are expected to remain unchanged except for one item,depreciation,which is expected to increase by $725.By how much will the depreciation change cause the firm's net after-tax income and its net cash flow to change? Note that the company uses the same depreciation calculations for tax and stockholder reporting purposes.

• A) -$383.84; $206.68
• B) -$404.04; $217.56
• C)-$425.30; $229.01
• D) -$447.69; $241.06
• E) -$471.25; $253.75

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Definitions:

Sternberg's

Refers to theories developed by psychologist Robert Sternberg, especially his triangular theory of love or his theory of intelligence.

Triangular Theory

A theory of love proposed by psychologist Robert Sternberg, which suggests that love consists of three components: intimacy, passion, and commitment.

Commitment

The state or quality of being dedicated to a cause, activity, or person, often implying a long-term engagement or obligation.

Sternberg's

Refers to Robert Sternberg's triangular theory of love, which posits that love is comprised of three components: intimacy, passion, and commitment.