Matty's Place Is Considering the Installation of a New Computer

question 45

Multiple Choice

Matty's Place is considering the installation of a new computer system that will cut annual operating costs by $11,000. The system will cost $48,000 to purchase and install. This system is expected to have a 5-year life and will be depreciated to zero using straight-line depreciation. What is the amount of the earnings before interest and taxes for this project?

• A) -$9,600
• B) $1,000
• C) $1,400
• D) $11,000
• E) $20,600

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Definitions:

Equitable Estoppel

A legal principle preventing a party from denying facts if their own actions have led another to perceive those facts as true.

Legal Obligation

A duty enforced by law, requiring an entity or individual to conform to certain actions or refrain from certain acts.

Written Promise

A written document where one party agrees to perform or refrain from specific actions.

Quantum Meruit

A legal principle that allows a person to recover the reasonable value of services provided, when no specific contract was made as to payment.