If Babette's Bicycle Shop Can Rebuild Three Bicycles for $200

question 39

Multiple Choice

If Babette's Bicycle shop can rebuild three bicycles for $200 and four bicycles for $240,then the average variable cost of four bicycles

• A)equals $40
• B)cannot be determined without more information
• C)equals $60
• D)equals $240
• E)equals $10

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Definitions:

After-Tax Discount Rate

The rate used to discount future cash flows to their present value after accounting for taxes.

Working Capital

The difference between a company’s current assets and current liabilities, indicating the amount of liquid assets available to fund the company’s day-to-day operations.

Discount Factor

A multiplier used to discount future cash flows to their present value.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, resulting in a consistent expense charge.