Calculate the After-Tax User Cost of Capital of a Machine

question 38

Multiple Choice

Calculate the after-tax user cost of capital of a machine that costs $5000 and depreciates at a 25% rate,when the interest rate is 5% and the tax rate on revenue is 25%.

• A)$200
• B)$275
• C)$2000
• D)$2750

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Definitions:

Debenture

An acknowledgment of debts by a corporation normally involving more than one creditor; often used interchangeably with “bond,” but whereas a bond is typically secured against a specific asset, a debenture may be unsecured or secured by a floating charge against inventory.

Commonly Used

Refers to something widely adopted or practiced by a large number of people or within numerous contexts.

Bond

A share interest in the indebtedness of a corporation; often used synonymously with “debenture,” though a bond is normally secured against specific assets, while a debenture is likely not.

Borrow Funds

Refers to obtaining money from another party, usually a financial institution, under the agreement that the money will be repaid, typically with interest.