The Sawmill Expects to Generate a Cash Flow of $59,000

question 29

Multiple Choice

The Sawmill expects to generate a cash flow of $59,000 next year if the economy booms and $46,000 if it does not.The probability of a boom is 20 percent.The firm has debt of $52,000 that is due in 1 year and has a current market value of $48,700.The firm plans to close after this coming year.The current promised pretax return on debt is ________ percent,and the expected pretax return on debt is ________ percent.

• A)6)78;1.16
• B)6)78;-3.08
• C)5)49;1.16
• D)5)49;-2.67
• E)6)27;-3.08

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Definitions:

Pollution Abatement

Measures and processes implemented to reduce, control, or eliminate pollution from various sources in order to protect the environment.

Marginal Benefit

The extra enjoyment or value derived from the consumption of one more unit of a product or service.

Marginal Cost

The increase in cost associated with the production of an additional unit of a good or service.

Marginal Cost

The variation in the overall cost of production that occurs with an increase of one unit in the quantity produced.