Mika Withdraws $100,000 from Her Trust Fund to Start Up

question 3

Multiple Choice

Mika withdraws $100,000 from her trust fund to start up her own manicure business.The trust fund earns 4 percent interest.In order to properly account for all costs of her business,Mika must not forget:

• A) the implicit cost of $104,000.
• B) the implicit cost of $4,000.
• C) the explicit cost of $104,000.
• D) the explicit cost of $4,000.

---

Definitions:

Earnings Before Interest

Net income before interest expenses have been deducted; used to analyze the profitability of a company's core operations without the cost of borrowing.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on the income or profit earned.

Optimal Capital Structure

The most favorable mix of debt and equity financing that minimizes a company's cost of capital and maximizes its stock price.

Tax Saving

Strategies or investments that reduce the amount of tax owed by taking advantage of allowable deductions, credits, or exemptions.