What Amount Must Be Earned to Induce Investors to Continue

question 19

Multiple Choice

What amount must be earned to induce investors to continue to supply the funds necessary to maintain a firm's capital assets?

• A) stockholder equity
• B) the opportunity cost of capital
• C) economic profit
• D) accounting profit

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Definitions:

MACRS

The Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes that allows faster write-offs on property.

Mid-Month Convention

A rule for depreciation of business assets that assumes assets are acquired and disposed of at the midpoint of the month.

Personal Property

Assets belonging to an individual that are movable, excluding real estate or land.

Fines Paid

Monetary charges imposed as a penalty for breaking laws or regulations, generally not deductible for tax purposes.