This Question Is Similar to Question 9 of Chapter 19

question 11

Essay

This question is similar to Question 9 of Chapter 19 in your textbook.The ABC Corporation is contemplating purchasing a new computer system that would yield a before-tax return of 30 percent.The system would depreciate at a rate of 3 percent per year.The after-tax interest rate is 11 percent,the corporation tax rate is 35 percent,and a typical shareholder of ABC has a marginal tax rate of 30 percent.Assume for simplicity that there are no depreciation allowances or investment tax credits.Do you expect ABC to buy the new computer system?

---

Definitions:

Clear and Effective

This term implies communication or actions that are understandable and produce the intended results without confusion.

Technical Words

Terminology specific to a particular field or area of expertise, not commonly understood by the general populace.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.

Road Accident

An unexpected incident involving vehicles on a public way that results in damage or injury.