Deep Mining,Inc

question 44

Multiple Choice

Deep Mining,Inc.,is contemplating the acquisition of some new equipment for controlling coal dust that costs $174,000.The firm uses MACRS depreciation which allows for 33.33 percent,44.44 percent,14.82 percent,and 7.41 percent depreciation over years 1 to 4,respectively.After that time,the equipment will be worthless.The equipment can be leased for $53,100 a year for 4 years.The firm can borrow money at 11.5 percent and has a 36 percent tax rate.What is the net advantage to leasing?

• A)$5,225
• B)$5,607
• C)$6,611
• D)$6,847
• E)$6,950

Describe the equilibrium condition for firms in perfectly competitive markets.

Grasp the concept of marginal revenue and its equality to the price in perfect competition.

Understand the role of marginal revenue in decision-making for firms in perfect competition.

Understand the relationship between price, average total cost, and profit maximization in a perfectly competitive market.

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Definitions:

Effective Tax Rate

The average percentage of income paid to the government in taxes, considering all deductions and credits.

Future Value

The value of a current asset at a specified date in the future based on an assumed rate of growth over time.

Deferral of Taxes

The postponement of taxes to a future period, commonly used in retirement savings plans and investment accounts.

Traditional Retirement Plan

A retirement savings plan that offers tax advantages to the saver, typically involving pre-tax contributions that grow tax-deferred until withdrawals begin at retirement.